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Top Reasons for Startup Failure and How Yours Can Succeed

There are so startups which just starts and then vanish, but here I have come up with a rescue ideas


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Kanika Rahat

3 years ago | 5 min read

Any new business is vulnerable to failure. In fact as a matter of fact 9 out of 10 startups fail around the world. 50% of them will fail in first year (since their inception) and 95% in next 5 years.

To me reasons are quite obvious. As an entrepreneur with my experience I can tell you some of the top reasons that are responsible for a startup’s failure.

If you know the reasons that takes a startup down then you can surely avoid them and definitely succeed in your venture.

With my years of experience I jotted down 12 main reasons that cause a Startup to fail.

1. Creating a Product/Solution that Nobody Wants

The first most common reason why a startup fails to takeoff is they end up creating a product or a solution that no one wants.

There isn’t any real demand for that particular product in the market but still entrepreneurs can’t figure this out.

You got to first ascertain the need of customers and then create a solution around it.

In fact before launching in the market a product has to go through a rigorous testing. And only then it gets out in the market.

Hence before you materialize your startup ideas you need to find whether it suits the customer or not.

2. Wrong Business Model

Your entire business model could be wrong. A business model dictates the commercial viability of the startup.

An inefficient business model means high cost of acquiring customers with a very low ROI (Return on Investment).

If you are unable to create a sustaining revenue model for your startup then you can’t keep up with the cost of running the business.

So to avoid this concentrate on understanding your target audience, increase ROI by reducing cost of acquiring new customers and establish a solid business plan.

3. Not Building a Right Team

I must tell you my first startup failed because of this very reason. I completely failed to build a winning team.

My experience says don’t hire anybody because you just want to save money. If you are not good at managing human resource then hire a professional HR manager who can hire right people for you.

You will be surprised to know that when it comes to a startup then teamwork is more important skill than intelligence.

I hired a lot of intelligent people but there was no teamwork among them. Hence because of disharmony my startup failed.

So build a more diverse team with different skill sets.

4. No or Very Poor Marketing Strategy

Either startups don’t have a marketing strategy in place or if they do then it is very poor.

Keep in mind competition is very tough and to beat it you need a solid marketing strategy.

Whether it is inbound marketing or outbound you need to draw a complete plan. For example, how to implement SEO or social media marketing strategies you got to sit down and figure it out.

If don’t have the technical knowhow then outsource it.

Always remember no business is bound to be successful the moment it is created. It needs some marketing.

5. Pricing Issues

Today consumers are very prudent when it comes to choosing a product. If your product is too expensive then they won’t buy it.

Hence how do you price your product?

If the price is too expensive then customers won’t buy it but if it is too low then your business can’t stay profitable.

Study your competitors and find out what are they offering. You need to offer your product at a price that doesn’t affect your margins.

But if your product has a great value then pricing won’t be an issue because customers would be willing to pay more for the value they are getting.

6. Funding Constraints

This is one of the major problems that a startup could face. Not all startups are lucky enough to get uninterrupted flow of money from investors.

Money is finite and to keep your business afloat you need constant cash flow. You got to pay your employees, marketing agencies, rent, bills etc.

So you have to secure all the funding well before in advance. Always stay in touch with your investors and keep them abreast with developments and your funding needs.

If your ROI is low and expenses high then investors can pull back anytime from the startup leaving you high and dry.

7. Partnering With Wrong Investors

As you know funding is the prime concern for any startup. So many entrepreneurs end up partnering with wrong investors just for the sake of money.

Initially you may get all the funding you need but in the long run you also need insights, guidance and mentorship from the investor’s side. But many investors fail to do so. They simply refuse to take any interest in your business.

However on the other hand there are investors who are too intrusive in your business and make it difficult for you to work independently.

Hence you need investors with a right balance. Choose them right before you move forward.

8. Ignoring Customers’ Concerns

Don’t ignore your customers to please your investors.

Focus on your customers and their needs. Gaining their loyalty and trust is very important.

User centric approach will increase your competitiveness. Irrespective of Customer’s positive or negative feedback, it will improve your service by a long shot.

9. Too Much Debt

We all know highly leveraged companies are bound to fail when they are unable to generate consistent profit.

Once your business shoots up and starts generating revenue you got to start paying all your debts. Don’t spend the money on your personal needs. Your business comes first.

So you need to ensure that your company stays profitable all the time. Ensure that you are getting paid on time for your services by your clients.

10.Legal Issues

Many startups have failed because of legal issues. Your business must oblige with rules and regulations set by the government.

You can learn from the mistakes of other failed startups.

Hire a good lawyer who knows your business thoroughly and consult him/her each time you take a decision.

11.Not Tracking Your Competitors

Every startup thinks that their business is unique and they are the pioneers, so there must be no other business like ours in the market.

Well this is one of the reasons why they fail. Your plans may be unique but still there are others who are doing the same thing in your niche.

Track them and find out what they are doing that you are not. This approach helps you to avoid mistakes and learn new things without reinventing the wheel.

12. Lack of Passion

Initially startups do well but later they lose traction and go bust. This is because founders and investors are not passionate about the company and its product.

They started the business just for the sake of money and not the love of the work they are doing.

Initially they might get some success but later they neglect the business and let it go.

They fail to scale because they simply are not passionate anymore like they were in the beginning.

So don’t let your inner entrepreneur die in you.

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Kanika Rahat


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