Why Over Half Of All Startups Fail
If you have dreams of creating your own company, then you’ve probably done a fair bit of startup research. Needless to say, there are some pretty damning statistics out there to do with startup success rates.
Recent stats say that over half of all startups fail within four years of opening. That’s one in two startups gone before they even take off. Think about how crazy that is for a second. Half of the people reading this article will probably see their business venture fail – it’s mad!
You don’t need me to tell you that this is not a good thing at all. I don’t want your startups to fail, and I know you all certainly don’t either. Therefore, I thought it made sense to shine some light on all the startup failures out there.
The list below will contain some of the most common reasons that over 50% of startups fail within their first four years. Hopefully, you’ll not only find this interesting but also it should help you avoid making these mistakes, to keep your business afloat.
6 Reasons Why Over Half of All Startups Fail
#1. A Bad Team
Many companies fail because the team behind them just wasn’t good enough. There are many examples of inexperienced heads getting together and not really knowing what to expect from the business world.
When you don’t have business experience, it’s automatically harder to run a company. Of course, experience isn’t always essential, particularly if you have the knowledge and education to back you up.
The problem comes when your team lacks both experience and knowledge/education. You don’t know how to navigate through the business world, you have no real clue what you’re doing, and it’s almost naive of you to think you can start a business.
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My advice to anyone is to ensure you get a good team behind your business right from the word go. As the business owner, you should be one of the most knowledgeable people there. You can’t go wrong with studying and improving your education before starting a business.
There are so many business degrees you can get these days, and you can even study for an online MBA too. Going through the educational system will help you gain all the knowledge you need to help market a company properly, write good business plans, and so on.
Then, try and get people on-board that have prior experience of running a business. It’s kind of like baking a cake, and your team are the tools that mix the ingredients together. If you use the wrong tools, the cake will turn out badly and be a failure.
#2. No Real Demand
A massive cause of startup failures is the complete lack of demand for your business and what you offer. Businesses depend on market needs and demands – if people are crying out for your products/services, then there’s a big demand, and you’ll make a lot of money.
But, if there’s no real need for what you offer, then you aren’t going to make money – simple, right?
You don’t need to be a rocket scientist to understand this point, it’s pretty clear for all to see! To avoid this, simply do your market research properly. Make sure no stone is left unturned, conduct a thorough look at the market and see if the demand is there.
#3. Losing Out to The Competition
Every startup in existence will face competition at some point. A lot of you will probably already have business ideas where you enter a very competitive market. If you’re clever enough to come up with a fairly original idea that’s unique to the market you operate in, then you may get a year or so with no competition.
Things will be going great, then other people realize your idea is a big seller, and they set up rival companies. Before you know it, there are loads of rival businesses all competing with you and pushing you to the side.
They’ve all looked at what you do well and improved upon it. As a consequence, your startup is failing and forced to close because you’re losing customers and making no money.
I find this reason to be one of the toughest ones to deal with.
However, the best advice I can give is to never avoid your competition. Don’t turn a blind eye to what they do and try to ignore them. Make sure you’ll checking up on them and analyzing their business practices.
This helps you figure out ways in which you can offer a better service than them, and make your company rise to the top. You always have to be one step ahead of your competitors, and you’ll never manage this if you just ignore them.
#4. Below Par Marketing Strategy
I can’t emphasize enough how important a good marketing strategy is for a business. Especially a small startup that’s trying to make a name for itself amongst a lot of other bigger businesses.
How are you going to convince consumers to choose you over the more established guys in your industry? It all boils down to marketing, advertising, and just plain promoting your company as best as you can.
If you don’t have a good strategy, no one will know you exist, you won’t bring in customers, and you’ll just fail.
We could talk all day about what makes a killer marketing strategy, but I’ll try and keep this brief and simple. At the heart of your strategy should be your brand.
Think about how you want your business to be perceived, what values you wish to convey, and so on. This will, ultimately, help you decide how you promote your company.
What’s more, explore as many ways of marketing as you can, with a firm emphasis on digital. Social media, SEO, and all that good stuff will be so vital to improving business success rates.
#5. Not Having Enough Money
Another simple reason for many startup failures is a lack of money. Every business should have a bank account that’s full of money. You use this money to pay for things, like your employee’s wages, premises rental costs, and other business expenses.
When you first get started, this money can mainly be generated via a business loan, investors, or any other means you have in mind. Then, as you get more successful, your sales should help keep your balance ticking over and ensure you have enough money to pay for everything.
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However, many companies fail because they run out of money. They don’t have enough in the kitty, and can’t pay for all their expenses, meaning they end up in debt and quickly spiral out of control.
How does a startup run out of money?
There are two main reasons; you’ve got too many expenses, and you aren’t making enough money. If you have too many things to pay for, it means you’re making life harder for yourself. It puts more pressure on your sales figures as you have to make enough to cover these expenses at the very least.
So, when you don’t make enough, you start losing money, and it can quickly turn bad. My advice is to work on reducing business expenses as much as you can, while simultaneously creating a killer sales plan to make lots of money.
#6. Poor Customer Service
We’ll end this list with – in my opinion – the easiest way to ruin your business. The customer always comes first. No, this isn’t just a little saying that someone made up to try and convince people to look after their customers.
It’s a fact; your customer is the most important thing to your business, so they demand the most attention. So many startups fail because they don’t listen to customer critiques, they don’t deliver a good service, and then just generally leave their customers feeling unhappy.
The thing is, an unhappy customer won’t stick around. Especially when there are rival companies that take better care of them. They’ll quickly take their money elsewhere, leaving you in a pickle.
Poor customer service automatically leads to a decrease in customers, which will have a negative effect on your sales. You’ll stop making as much money as you used to and will eventually close because no one is coming.
The thing is, it’s so easy to provide a good level of customer service. All you have to do is treat your customers right, respond to them quickly, take their criticisms on board, and just generally make them feel wanted.
Customers love it when they feel as though you really care about them and want to make them happy. This leads to repeat business, but it also helps lure in new customers as they see how great your service is.
Understandably, there might be a few other reasons why most startups fail. But, these are the most common nowadays.
As I said earlier, seeing these reasons should help you reduce the chances of your startup failing.
You now know what causes failures and can attempt to work around these problems. Hopefully, this doesn’t just keep your company afloat, but it helps lower that failure rate too.