Community//

Reasons for the Failure of Startups

More than 70% startup failed in first 5 years.

Source - korolit.com

Startups are the stepping stones to every big business idea. It has been hyped that startups are more or less successful as most of the people know only the good part of the story. There are many latent unnotified failure stories of the startups. Many startups failed mysteriously and unknowingly. There cannot be a single reason for the failure of the startups. Many young or experienced persons come up with a great idea yet they fail to achieve the desired results and run into huge losses. The heart-wrenching stories of these aspiring entrepreneurs leave us wandering to find the reasons behind such failures.

Following reasons may be cited for the failure of startups along with the ways by which they can be avoided:

Lack of market need

The first and foremost step of setting up any business involves the analysis of the market. The startup would flourish into a successful business only if it has been set up by analyzing the needs and wants of the target market. If a startup is of such a product or service which has the least or no demand in the particular region, it is sure to be a failure.

Failure of startup for such a reason can be avoided by studying the needs of the target market. If a demand for a particular product or service is more in a defined region than its supply, only then the investment must be made for that startup.

Running out of funds

No business can operate without adequate funds. Cash is required for day to day operations, investment, growth, expansion, etc. Many startups fail to bloom into a good business due to the lack of availability of sufficient funds. The startup may not require as many funds as a business requires to grow and prosper. The requirement of raw material, transportation, marketing, completing the order in time, etc. are some of the areas that require daily monetary transactions.

The situation of running out of funds can be avoided if proper cash management system is maintained and funds are raised effectively from time to time. A professionalized team should be allotted the task of management of inventory, funds, and requirements of the business.

Inefficient team

Inefficient, lazy and demotivated team can prove to be harmful to any startup. Lack of expertise in their operations can result in a defective production of goods and services. Moreover, unwillingness and lack of cooperation towards learning more and achieving the

benchmarks on the part of the workmen can hamper the growth of a startup. Sometimes, the appropriate workforce is not hired for a particular job. Workers should be chosen based on their qualification and skills.

Drowning of a business idea can be prevented by constantly motivating your team to perform better by offering them various incentives. The operational men should be professionally trained and expert by the provision of various training and development courses to them. They should be rewarded for their better performance. Negative motivation can also be used when required.

Poor marketing strategy

Developing a good product doesn’t ensure good sales and high demand. Your product or service will reach the target audience only if it has been properly conveyed to them. Inability to communicate with the prospective buyers leads to redundancy of the purpose of start-up. Those who are new to the market have to compete with their competitors only by advertising and offering a good product to penetrate the market.

Avoid the failure of your start-up due to poor marketing strategy by analyzing and tapping all the available sources to communicate to the target audience about the availability of your product or service. Design a website to promote your product online as well. Encourage schemes and discount offers to increase sales. Take reviews from the customers and offer to them after sales services.

Pricing or Cost related issues

Some start-ups face the issues related to price or cost of the product. A good product or service doesn’t mean hyped prices. From the point of view of the rational consumer, the price of the product must commensurate the benefit derived from it. No one would want to pay more for less. High prices can lead to a low customer base, underperformance in sales and revenue and gradual decline of the business.

You can avoid such issues by fixing nominal prices for your products and services that do not pinch the pocket of your target customers. The price of the product should be such that you are able to cover the production costs plus a reasonable margin as your profit for the growth of the business.

Legal concerns

Some start-ups have to face pressure from courts of law while they are trying to expand and diversify their business. This may happen when certain laws and rules are not abided by the entrepreneur. Sometimes, the documents of incorporation or registration are not clearly sorted which may cause litigations against the start-up.

In order to avoid litigation against your start-up that may result in complete failure of your idea, it is always better to hire attorneys or lawyers who can assist you in getting through such matters and help you abide by the laws of the state and land.

Poor product or service

Your idea of the business won’t serve you better unless your product or service is of good quality. The customers will prefer your product only if it has an edge over the existing products or services.

You can eliminate this cause of failure by improving the quality of your product. Do not try to engage in faulty methods of earning huge profits as building a customer base is of great importance for a start-up business venture.

Lost focus

Many times, the entrepreneur engages himself in changing ideas and visions continuously in the scope of offering something new every time. This may lead to loss of focus on the initial purpose and idea behind the start-up.

Maintain your focus on the underlying idea behind your start-up. Launch your products and services on time, neither too quickly nor too gradually.

These are some of the reasons why a budding business may not be able to flourish and bloom into the successful ones. Analyse the problems and resort to the solutions likewise.

The Thrive Global Community welcomes voices from many spheres. We publish pieces written by outside contributors with a wide range of opinions, which don’t necessarily reflect our own. Learn more or join us as a community member!
Share your comments below. Please read our commenting guidelines before posting. If you have a concern about a comment, report it here.

You might also like...

Hurdles faced by Startups
Community//

Hurdles Startups Face In Journey To Become Successful Businesses

by Zubair Hussain Khan
Community//

HOW TO BUILD A MOBILE APP STARTUP THAT ACTUALLY MAKES MONEY

by vijay s
Community//

The Most Common Reasons Why Startups Tend to Fail

by Isaac Rouhtas

Sign up for the Thrive Global newsletter

Will be used in accordance with our privacy policy.

Thrive Global
People look for retreats for themselves, in the country, by the coast, or in the hills . . . There is nowhere that a person can find a more peaceful and trouble-free retreat than in his own mind. . . . So constantly give yourself this retreat, and renew yourself.

- MARCUS AURELIUS

We use cookies on our site to give you the best experience possible. By continuing to browse the site, you agree to this use. For more information on how we use cookies, see our Privacy Policy.