Harsh Reality Of StartUp, Why Do They Fail?

Harsh Reality Of StartUp, Why Do They Fail?

Harsh Reality Of StartUp, Why Do They Fail?

Harsh Reality Of StartUp, Why Do They Fail?

The Harsh Reality Of StartUp

A start-up is not yet a company as one might imagine, with a well-established organization, marketing a product or a service on a perfectly identified market. The harsh reality of startup is the innovative character of its offer and its economic model does not make it possible to clearly define all the components of its market and to ensure immediate profitability.

1. Nobody is waiting for your company to exist.

2. New products and services are created everyday.

3. People aren’t exactly hunting looking to spend their money on stuff they haven’t heard of.

4. The second your name or brand is a barrier to your growth, there is a huge problem.

5. Think about what comes first, or your customer’s needs? it’s not going to feel good any of those times.

6. Starting a business is like riding a roller coaster. Ups and downs and sometimes really flat.

7. You have to make money to exist and to live. Your personal life is going to suffer. Although, if you’re doing what you ought to be doing then you probably don’t notice too often.

8. Very few startup get it right the first time. Most people will fail and fail spectacularly before they stumble upon something that actually works. Just simply don’t make the same mistake twice.

9. Many though deciions to be made. Everyone has opinions, but in the end you are the captain and the ship must head in the direction that you believe it should head. Listening to others only allows you to push the blame of failure onto others.

10. Your ideas are only good ideas if people are willing to pay for those ideas.
Good products and services are the products and services that sells! Now you understand it… but it will take a long paragraph to explain…

Success is subjective. A winner is only a winner when he decides he’s a winner.

Previously, the power of large corporations was based on their size and financial capacity. The bigger ones ate the little ones. Now it’s the fastest that absorb the slowest and that’s about startups.

Comprehensive Business Startup Checklist: From Idea to Launch + Excel and Word Free Download

Why do startups fail?

1 – Do not target a “market need”

Too many startups try to solve problems that are “interesting” instead of solving problems that meet a market need. According to the study, this is the main cause of failure with 42% of cases. Many startup companies, which offered doctors a tool to improve internal communication, for example, they realized that we had no clients because no one was really interested in the model that we were pitching. Doctors want more patients, not better communication with them.

Read also: How to Build an Enterprise and How to start a business? The steps to follow

2 – Lack of cash

Money and time are limited and must be allocated wisely. The question of how to spend your money remains a frequent question and the reason for the failure of nearly 29% of startups. The latest announcements have demonstrated that it is difficult to manage money in times of growth. The fundraising race is also an opportunity for many to no longer focus on the essentials, namely creating value and cash.

Read also: Success of Your Business Depending on Finance, Sales Marketing and Operations

3 – Not the right team

Often cited, a team with different skills is essential to the success of a business start-up. Far too many startups find themselves forced to outsource production or development. If the founding team is not able to release the MVP (Minimum Viable Product) alone, it is already because it will not have the backs strong enough to assume the growth.

Bad strategies in the face of adversity

Associated with these more difficult phases, a question was also asked about the strategies adopted to deal with them. Forming an adequate work team through the hiring of qualified human resources was one of the tactics. In addition, the marketing application to promote the company and the product concerned, no matter how basic, has been indicated. Finally, outsourcing services and patience with the process were other techniques advised by start-ups.

These attitudes on the part of entrepreneurs are essential to avoid at all costs the factors by which startups fail.

4 – Too much competition, bad products, price and marketing

While startups shouldn’t pay too much attention to competition, the reality is that when an idea gets hot or gets market validation, there can be a lot of new entrants in a very short time. Ignoring the competition is the cause of failure for nearly 20% of startups.

The sale price

Pricing is a dark art. What criteria should be used? How to be sure of the right price? However, it is vital data for the success of a startup. Startups have broken their teeth because of a price that is not suited to their product/service.

A “User-UnFriendly” product

UX design is today the key to customer loyalty. As long as your product is in Beta, you can afford to neglect this part a bit. Once the final version is released, you have to make sure that your product adapts perfectly to the needs of your customers.

Lack of a business model

A startup is a business that needs to make money. Hoping for fundraising, creating a mass business model or hoping to capitalize on traction is not a safe business model. You must be able to generate cash and prove that your business model is viable. Read also: Business Model Examples for Your Inspiration

Bad marketing strategy

Many startups fail because they don’t know their target and even less know how to get their attention and convert them. We often find this case in startups founded by technical profiles that focus more on building the product than on business development. Read also: Marketing Management Solutions

Disregard customer feedback

Ignoring users or not collecting user feedback is a fatal mistake for most startups. Startup eCrowds said, “We spent way too long on the build and didn’t pay attention to feedback”.

Lack of domain expertise

There are many good ideas, but many of failures are due to lack of passion for a field or lack of knowledge of a field. Technical expertise is becoming an important skill for all leaders who want to excel in their fields. In any case, this is an observation that has been confirmed over time in several countries around the world. For example, doctors who manage hospitals obtain much more convincing results compared to hospital directors from sectors outside the health sector.

5. Bad time to market

Arriving too early is expensive. Arriving too late is pointless. A bad time to market can just kill a startup. Either your customers are not expecting you, or they no longer need you.

Some startups, for example, failed because they were too far ahead. This is the case of Calxeda, an IT startup, which offered innovative services on a technology that no one was using yet… that’s what we call bad timing.

6. Not focused, too scattered

Getting distracted by projects, personal issues, and getting distracted from goals is the reason for startup failures. You have believed in your idea enough to get started; believe it enough to follow it through. The defocus marked the end of the adventure. Our interest in what we were doing began to wane. We didn’t even know if we wanted to continue, if we wanted investors or even if we just wanted to create a startup.

The pivot that fails changing some aspect of its core products or services

Pivoting for the sake of pivoting is pointless. It should be a well-calculated project, where business model changes are tested, and the results measured. Otherwise, you cannot learn anything.

Disagreement with investors / Co-founders

A discord between the co-founders or with the investors is certain death. It is also very rare for the founders of a startup to start and end an adventure together without a hitch. It is just as rare to find men from the start in key positions at the end.

7. Legal issues

Sometimes a start-up can evolve from a simple idea into a very complex world and that can cause its downfall very quickly.

This is particularly the case of some startup, which was forced to close the service. We can also mention TwitPic, which was forced to shut down its Twitter photo hosting service after a legal dispute with the social media ogre which threatened to cut off access to its API.

8. Bad advice

The changes in decisions by entrepreneurs, it is possible to determine the reason why startups fail. These would change some aspects related to the success of the business, in which a correct forecast and definition of the deadlines and the results of the product stand out. Likewise, there is a more in-depth market analysis and a more suitable work team.

Finally, the entrepreneurs suggested improvements to the support that currently exists. More availability and dedication of the entities contacted, speed and efficiency, better management of the work team, easier investments and partnerships are some of the responses provided.

9. Rapid growth comes first, profitability second

Ah, it’s a classic. All you read is going up, up and up! You need growth!

This is all fine as long as you have money in the bank and new investors continue to fund your business. In most cases, if your business is growing rapidly, you will be able to raise more funds. The term “fast” has different definitions depending on the industry, but you’re probably looking at tripling or quadrupling your YoY income.

But what if you reach, say, a 50% growth rate? It won’t excite investors and probably won’t get you that Series A or Series B funding. So what to do, well, two ways:

A) Keep going full throttle until you win, or you die.

B) Take a step back and make your business profitable.

The fact is that the purpose of a business is to make money. Slow growth is better than certain death.

A challenge that many startups face when they have raised too much money. In this case, the pressure from investors to get a return on their capital investment can put you in a difficult situation. In our case, our move to profitability, although it has slowed our growth, has given us a very unique position to choose whether we want to raise capital or not.

10. Not learning from your mistakes

The evolution of your economic model will have already given you a large number of indicators on the new directions to take in your business. You learn a lot from your mistakes! Trials and tests make it possible to identify gray areas and areas for improvement in your product and/or business model.

Customer feedback, often done in real time, also feeds your thinking to further shape your product or service. Iteration is the watchword in this innovation process.

Action Plan: Steps to follow + examples and tips

Sources: CleverlySmart, Investopedia, Harvard Business School Publishing

Photo credit: Tumisu via Pixabay

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