Top 10 reasons of “Why startups fail?” How to avoid it? 2020
According to Startup Genome reports, 90% of startups fail. Why startups fail? There are different reasons and different research. I will help you based on my own experience. Here is my list of the most common mistakes. I will explain 1 per 1 by single posts.
Top 10 reasons of “Why startups fail?” How to avoid it?
1. No market need.
According to CB Insight, 42% of the startups fail because no market need. Wow, that’s almost half of the reasons to avoid failures. Is CB Insight telling us this is the main reason of startup fail? Actually, by statistics, it is the main reason.
What does it mean no market need?
It means, your solution doesn’t cover any current needs in the market or expressed in a different way: The market is not requesting or looking for the needs covered by your product or services.
Why is this happening? Unfortunately, many startups and companies are launched without a previous market analysis and deep testing. This problem can be divided into two reasons: “Not filling a gap in the market” and “No market for this specific gap”.
Not filling a gap in the market.
The market is overcrowded with companies or solutions doing the same or fixing the same problems in the same way. So, how we can fill a gap in the market? To keep reading the full article you can do at this link: 4 Easy Steps to Understand The Fail of “No Market Need”.
2. Not having a niche market.
What is a niche market?
A niche market is a small or specialized market for a type of product or service. A niche market can be for a specific type of customers: Sector, location, size of the company, finance sources. A niche market can be also for a specific type of solutions: Quality, type of products or services, licensing model, price.
I recently cooperated with a startup without a niche market. On the beginning, they were trying to sell to small, medium business and enterprise customers. The process and methodology differ a lot from each other. In the same way, business requirements are very different from each other.
Later, they realized about the focus on enterprise and corporate customers were their core business and they stopped to don’t waste efforts with the small or medium business. To keep reading the full article you can do at this link: 4 Easy Steps to Understand The Fail of “No Market Need”.
3. Not commitment or passion.
“Don’t start a business because you want to make money. Follow your passion and the money will follow you.” – Anonymous
I have heard this sentence dozens of times by successful entrepreneurs of different size and sectors business. Therefore, commitment or passion is one of the key factors when it comes to make success a startup. Undertaking your own business entails responsibility and dedication in a persistent way. Especially when at the beginning you are like David against Goliath.
Do you know what startups, leadership, fitness and personal relationships have in common? In all of them, commitment, perseverance, dedication and passion are necessary.
Practical example: Fitness
Your goal is to stop being obese and start having a fitness body. This change does not happen from one week to another or even from one month to another. For this, it is necessary to keep it in the correct direction for a long period and after that period continue working on it.
In the aforementioned case of fitness, after 3 months in the gym, you have achieved your goal. To read the whole article you can do at this link: Not commitment or passion.
4. One of the biggest fear for young entrepreneurs: Fear of failure.
Many young entrepreneurs access to this entrepreneur world without realizing the meaning, the responsibilities or even the risks of being an entrepreneur. Let’s start with something basic: The meaning of entrepreneurship.
What does entrepreneurship mean?
Let’s take the dictionary for a while. Based on dictionary.com:
Entrepreneur: a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.
From my personal definition, it means going away from your comfort area of having a fixed salary every month, being responsible for the success or fails of your own company and the bigger impact of your fails compared with being an employee. After all, for the pros and cons is your own company.
For that reason, it is very common “to want to assure each step that is taken to try to minimize the risk of falling and failure. Every successful person knows the following: “The fail is part of the game”. It includes also this statement to successful actors, athletes, influencers, singers, etc. Meanwhile, you are afraid to fail, your competitor will be there without this fear and getting your own market and customers instead of you. This common situation happens caused by the lack of awareness of entrepreneurs risks and rewards. To read the full article you can do at this link: One of the biggest fear for young entrepreneurs: Fear of failure.
5. Having a poor Go To Market.
You can have the best product, but if you don’t know how these products fit with your customers, then it doesn’t matter what you have. Remember that some companies are able to sell “A shit”, but they put a nice wrapper and they will be selling more than you.
The first and most important point is to know who is your customers. Know your customers, its needs, its pain and bring added value. Then, you should think about how you are going to transform these needs into a product or service.
6. Underestimating the duration of the sales cycle.
I read some of the most famous webs with entrepreneur articles and tips for startups. However, I missed in their lists and articles the factor of: Underestimating the duration of the sales cycle. I found out how some entrepreneurs underestimate the duration of the sales cycle and this impatience leads them to burn out their budgets, employers or even relationship with partners and potential customers.
The duration of the Sales Cycle: It is the period of time from the the customer is a prospect till the customer make the purchase order.
Which factors are conditioning the length of the sales cycle?
There are several conditioning factors for the sales cycle. This is my personal list cooperating with technology vendors:
- Customer budget and costs.
- Direct needs covered by the product or service.
- Target public: Companies or Individuals.
- Company size.
- Sector: Private or public.
- Brand recognition.
To read the full article you can do at this link: Underestimating the duration of the sales cycle.
7. Poor leadership.
“The poor leadership problem” or it also known as “Bad leadership”. What is important to understand?
How does poor leadership impact on the startups?
One of the main reasons an employee leaves a company is because of his or her direct manager. This kind of problem also affects corporate companies. However, the impact of this problem is much bigger at startups than corporations. So, how does this problem impact on the startups?
- Lack of Stability.
- Direct impact on sales and partnerships.
- Bad reputation.
- Financial problems, as a consequence of all the previous one.
However, if you are reading this and you are at a management position. This article will help to be more aware of the mistakes to avoid and how to become a better leader.
What mistakes should you stop?
“We spend a lot of time teaching leaders what to do. We do not spend enough time teaching leaders what to stop.” – Marshall Goldsmith at What Got You Here Won’t Get You There.
To keep reading the article you can do at the following link: Poor leadership.
8. Not listening the customers and market.
- The partners and customers feedback, it is the most important feedback.
- Make a proper feedback process.
- “No hay más ciego como el que no quiere ver, ni más sordo cómo el que no quiere oir” – Spanish proverb.
- Better prevent than fix later.
The partners and customers feedback, it is the most important feedback.
The majority of the startups are working by channel partners. Some of them are 100% and others sometimes. Nevermind, they are as important as the customers are important for you.
Thus, there isn’t more important feedback as the partner and customers give to you. Without them, you don’t exist as a startup and neither your solution. Ignore this feedback and the competitors will receive your partner and customers with the open arms. To keep reading the article you can do at the following link: 4 Tips On How To Avoid This Startup Fail: Not Listening.
9. Spending all resources too soon.
There are some entrepreneurs that can have millions in their budget and they will always finish in bankruptcy. The main reasons to spend all resources too soon are:
Hiring too fast. It is very normal feel excited on the beginning and try to make a “Corporate team”, but at the beginning, you need to grow on R&D and Sales at the same time.
Spending more budget on R&D rather than selling. I found out a very common mistake on “Technical founders”, they will spend a huge budget on their R&D but not on Sales & Marketing. The result you can guess 🙂
10. Not pivoting or doing wrong.
Every successful entrepreneur knows how important it is to pivot and pivot and pivot… till you get with the correct match and strategy. There is nothing written when you speak about the magic formula of success.
Because of this, you can’t keep the same go to market strategy forever without results. You should also consider the duration of the sales cycle as I mentioned before, but never be stuck without getting results in the short and middle term. I don’t speak about sales, but at least get references or something that is adding value for your next steps.
What do you think about these mistakes? Have you ever experienced any of the issues mentioned in this article?
I hope this guide will help you to make your dreams true at your startup. If you find out this useful, I will appreciate you share this and more people can be guided by this.
Javier Nieto León
Founder at Startups TIPS