Why Most of the Startups Fail – 6 Important Reasons
“9 out of 10 startups fail.” This is a stark reality that IT industry is facing all over the world now. All leaders and gurus have taken this issue into deep consideration, and active discussions occur on both online and offline platforms to find out the causes and the solutions. Here we are discussing some vital reasons of startup failures which are usually left unnoticed.
Starting without a ‘Why’
As Simon Sinek explains in his famous ‘Golden Circle’ concept, the most crucial factor that ensures the success of any business, idea or movement is a clear answer to the question: ‘why?’. That should be the first question to be asked by an entrepreneur himself before establishing a startup. However, unfortunately, the majority starts from ‘what’ and then moves to ‘how’ and in most cases never thinks about ‘why’. If you don’t know ‘why’, how could you find what inspires you? Without a genuine cause of inspiration, how one can build a successful organization?
Optimism is definitely an essential quality one needs to uphold to become successful. But if it is unrealistic, that will be counterproductive. The high rate of failures of startups occurs because the founders who are mostly of young age group jumps with too much enthusiasm and energy into the tough competition without much understanding of the real market conditions. After the first few setbacks, the optimism will worn out easily, and the startup will be shut down forever.
Overlooking Business Management
Eventhough, one has the complete know-how on developing an outstanding software product, that alone is not enough to save his startup. There should be people who can take care of the other key aspects of business like accounting, communication, marketing, human resource management, and so on. But due to the lack of sufficient funding and ignorance out of the ‘unrealistic optimism’ most of the startups fail in those areas of business management. This will eventually leads to the failure of the startup itself.
No Business Plan
Business plan is like a map that helps the sailors to conquer the vast oceans and reach their destinations. Without a proper plan, no one can dream of becoming a successful entrepreneur. It sets goals as well as suggests the right routes to reach them. However, it can be seen that most startups overlook the importance of planning. Without knowing where you want to take the company, startup owners cannot bring in investments and attract partners or talents.
An exceptional idea cannot be materialized into a product without sufficient capital. When you look at the unsuccessful startups, you can see that most of them have failed in assessing and generating the required capital to develop and sell their products. They were not able to raise money to build key infrastructure and maintain a cash flow to fund day-to-day operations. “Having only 95% of the necessary capital to start your business is not enough. You need 100%. Just as an aeroplane needs 100% of its infrastructure to fly,” says Chris Baskerville.
Absence of Proper Marketing
To put it simply, any business has only two functions; ‘Produce and Sell’. If you cannot sell the product you make, there is no point in running a business. This is where, you can see, most of the startups do not have a method or plan of action. They, instead, create an ‘awesome’ app and just wait for the customers rushing to buying it. “The reason is that startups far too often think their only market is VCs, and that consumers will automatically love them the way their moms do,” writes branding consultant Bruce Philp.
These are a few important reasons due to which startups cannot fulfill the dreams. We can summarize it as: ‘if a startup does not care about marketing and business management, lacks enough capital and team strength to build lovable products and is run without a sound business plan, undoubtedly, it will fail in the end.’