The Key Reasons Most Startups Fail

By Fernando Berrocal

You're likely reading this post because you're an ambitious entrepreneur with aspirations–and unique solutions to resolve a certain problem. Nevertheless, you should be aware of some alarming statistics concerning any startup’s probability of failure. A study conducted by the Small Business Association shows that approximately 30% of startups collapse within their first year of existence. It also indicates that around 50% of startups fail in just their first five years of operations and that 67% fail within their first decade. More research shows that 90% of startups are not able to convert their business into “the next big thing.”

Startup Failure

What's the motive for the failure of a startup? What are the chances that your business will slip into the desired 10%? What can you do to ensure that the organization doesn't go the route of the bulk of startups? In this post, we will go over the main errors that new entrepreneurs make, how they make them, and the solutions to try to correct them.

  1. Striking out on your own

Being a solitary founder seems appealing.  However, it’s not one person's efforts that produce success, but rather cooperation and collaboration between business partners.

Where do they make a mistake? Creating a business is a difficult process, and doing it alone in a crowded marketplace may be disastrous. Entrepreneurs that go on this journey independently commonly encounter a difficult route. It's difficult to deal with all of this on your own due to failures. Having a partner helps entrepreneurs tap into a variety of perspectives, which can add up to a considerable impact.

The main solution for this problem is to collaborate with a co-founder to gain a second opinion on your strategy. To better choose a co-founder, perform a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) of all potential partners before deciding on one. You also must evaluate them based on how they function in difficult circumstances and ascertain if the co-founder has the same aims and ambitions for the venture. You should include a diverse range of individuals in your group, each with their own set of skills and viewpoints.

  1. Spending too soon

Placing a huge amount of cash into the earliest stages of production might destroy a business even before the product and/or service they plan to launch is even released. There are several methods to find cost-cutting possibilities in your startup budget.

Where do errors occur? One of the most common blunders made by new organizations is relying on financing in the early stages. These business owners take on investments without a plan for how they will use the funds. These owners try to grow the firm as quickly as they have a large amount of cash, but they run into problems and eventually collapse.

The main option to deal with this is "bootstrapping", a method of starting a business by utilizing current resources. It supports an inexperienced entrepreneur in learning the ropes of the business. By employing interns, finding volunteer assistance, and promoting your services for free, you can preserve your limited startup capital.

  1. Having a complicated business plan

Inexperienced entrepreneurs frequently mess up their business plan.  They might present it poorly, set ambiguous goals, or make unreasonable projections.

A business plan is the foundation of any organization, regardless of its size. This is the most important component, and it needs to be handled with care. Excessive complexities suffocate a sophisticated business strategy. A roadmap like this establishes incorrect objectives, uses weak standards, and causes uncertainty. Each one of these factors is more than enough to destroy a business in its early stages.

The main solution to deal with this problem is to receive the guidance of an expert to create a concise and simpler business plan. It's also important to find out what possible investors have to say about your model. However, before completing the strategy, seek constructive feedback.  Review the strategy regularly.  Look for areas where it may be improved, and make changes appropriately.

  1. Ignoring user feedback

When a startup ignores customer criticism, it is certain to eventually perish. Any form of new business can benefit greatly from this type of input. You need to dig deeper into the feedback, get to the base of the problems, and find solutions.

This has to be the clearest and most precise explanation for a startup's demise. You must keep consumer insights in mind once you've released the initial version of your product or service. Accepting negative remarks requires a lot of courage, but taking zero notice of user input is a proven way to ruin your startup.

Counter this problem simply by keeping an open mind when it comes to negative remarks.  Investigate the source of the customer dissatisfaction, as this will aid in the bug-fixing process. It's important to be honest and upfront about how far you've come in implementing changes. Create a positive connection with consumers by identifying their needs, and producing something that actually meets those needs.

 Reasons Behind Startup Failure

  1. Lack of Concentration and Purpose

How can two businesses in the same sector perform drastically differently, despite having the same resources and skills? The solution is straightforward: the failed business is lacking in focus and direction.

In the long term, a lack of vision can be harmful to an organization's growth. When a firm's board of directors makes a ruling without considering the consequences, the business is making a mistake. The decision can be about anything, but its consequences could represent a risk to the business. Focusing your efforts on social media and public relations before having the correct product(s) and/or service(s) for the customer is a typical case of doing things in the wrong way.

The solutions to this problem range from not allowing your startup's concentration to roam–stay focused on your product/service and your clients.  Don’t waste time and resources on things that aren't necessary–maintain a streamlined vision towards success.

Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

About Us

Started in 2000 in Washington DC, Masslight has served the DMV for 18+ years. We serve enterprises and startups with full-stack development and long-term project management services.

Contact Us

masslight logo
©2019 MassLight Inc.
Website by Oneness Co-Creative