Last Updated on December 8, 2017 by Tim
What makes sense for startups is that failure looms behind if they do not make, sell or share ideas or products that consumers need or really want. Smarter businessmen even create a need for consumers to need what they want to promote. However, there are startups that do not understand why they fail.
Is it lack of money, using the wrong strategy; or simply because they are not aware of other things essential to running a business? Below are some of the common causes of startup failure. It’s not an exhaustive list, but you’ll certainly find at least one in every startup failure post-mortem.
Starting a business alone can be daunting. Many people say that two heads are better than one but if there are more, that would be a much better idea! Companies with many founders may scrap an original idea but may end up taking in hybrid solutions that prove to be more successful in the end.
Some startups do not understand the meaning of a bad business location. If the thrust is local, then, using a local address to trap a particular target audience is a good idea. However, if there is a need for a higher visibility, it is but natural to establish shop where most of the company’s prospective hires live, where people who are highly sympathetic to its niche, and where there is a possibility of accidentally bumping on people of the same business category to gain expert insights from.
In an effort to avoid competition, most startups suffer from a very common problem and that is opting for niche that have a narrow scope or hard for the consumer to understand. The notion of investing in smaller ideas because they cost lower and pose lower risks is just another cowardly act for new business owners. Drafting a business plan that covers more demography allows more eyes turned towards the product and higher revenues. In short, the wider the niche, the wider the number of consumers for the product endorsed.
Many businesses are spin-offs from original ideas. Though some of them may prosper, many of them won’t. Among the best reasons why entrepreneurs with original ideas end up big is they answer specific needs. Facebook, Google, Apple and Hotmail are original ideas that answered several needs or wants like you Google to find answers, connect with friends and relatives using Facebook, or exchange communication on Hotmail. If a startup is not capable of identifying needs, it would surely go unnoticed.
Stubbornness does not help in improving a startup business. The best measure to use is adapting to the times, trend, economy and the most important aspect is listening to what users are talking about. Being open to new ideas and heeding complaints of consumers makes them more loyal to the brand. This gives startups more edge against their competitors.
Choosing bad programmers
Programmers are the backbones of millions of businesses; nevertheless, bad programmers caused many startups to fail. So how do you choose people to handle this job position if you do not even know which one to choose? First, you have to know where you want them to work on and things they are not capable of doing. You must hire someone who can do multi-tasking to get your money’s worth.
Using the wrong platform
A platform serves as the foundation of your business. If you are not familiar with it, let your hired programmer choose something that is optimal to your business needs. This saves you from further issues that would threaten your website’s user-friendly purpose. You can either talk to people in the know or search for the best platforms to use by comparing based on ease of usage, capabilities, as well as prices.
Slowness in launching
One thing that delays the launching of a business website is completion of software. As it is usually 85% done, it means you only need a few days or weeks to launch it. This is true in startups that already have a ready set of plan. Procrastinating on the launch allows for delay of ROI. While there is always an anticipated fear of being judged, launching as soon as the site is done enables solving upfront problems thrown in by users. Understand that there is always a need for improvement so get on with it.
No specific target market
How can you promote a product without having a particular set of audience in mind? Starting a business must first deal with a specific audience you want to sell your product to. Understanding the need of model demography and how the product will become an essential part of their lives is quite vital to the success of every new company.
Raising too little money
Most of the known successful startups took funding at some point of their business operation. In this case, you have to determine how much you need and how much funding you should take in from investors (if you are thinking of getting funded). You can benefit from investment companies who provide venture capital or you can use crowd funding which has become a popular trend.
However, each VC funding round is measured by time; so, you need to know if you still have enough left to jump on to the next step. Startups not profitable enough must know when to stop.
Spending too much
Raising a million and running out of funds means you have spent more than what was required. Each step has a particular budget and it is where some startup ventures fail. One of the errors lies on hiring too many people. Again, limiting the number of people by choosing multi-taskers is a good idea. Aside from this, the best step to take is to cut on the budget through careful selection of platforms, software and using a strategy that provides for the long haul.
Raising too much money
Working on a low budget kills new businesses but having too much in the purse creates a similar scenario. Receiving funding from a venture capital company means you have to start working on how to make it earn the soonest possible time. Investors are very cautious when it comes to funding most especially if it is a large sum that’s why some startups are way as well. Dealing with a VC firm is easy but looking for a moderate funding helps to avoid being pinned down that may cause investees to develop anxiety.
Poor Investor Management
As observed by many, some business owners reject ideas coming from investors which should not be the case. These people are not to be ignored because they can provide useful insights and much more, they want their investees to avoid being bankrupt because their money forms a part of the company. Nonetheless, owners must also be aware that giving in too much makes investors want to manipulate the company on a wider scale.
Sacrificing Users to (Supposed) Profit
Successful businesses worry about consumers first before thinking about profit. You can sacrifice your business model and save it for later to satisfy what your market wants at the moment. This makes up for a more engaging business wherein consumers rely on your next move which translates into a more profitable venture.
Fights between Founders
Fights between founders are inevitable and at times a couple or more founders leave before the startup takes on a fruitful path. This usually occurs when there is a clash of ideas or unsettled disputes; worst thing to happen is when the one who left is armed with all the technical side of the business. It is better to solve matters in a pleasant way and to keep on reminding each colleague about how the business was envisioned—together. The best way is to work with people having almost similar visions and with different capabilities.
There are more errors that speak about killing startups but the abovementioned issues top the list. Once these are straightened out, almost done startups may just be given a new lease at managing their own companies in a more cautious way and eventually earning more profits.