Most entrepreneurs start your businesses thinking that they’re starting the next big thing, but in reality, close to 90% of new businesses fail within the first three years. However, most new businesses fail due to a combination of reasons that they could have prevented. To achieve success, you need to learn from other business failures so that you don’t make the same mistakes.
5 Common Reasons Why Startups Fail and What to Do About It
Not focusing on the customers
As an entrepreneur, you need to focus on the customer more than building your business. This means that your main goal should be to solve a significant problem for other people. According to recent research, about 42% of new businesses fail because they didn’t solve a need for the market or failed to put customers first.
In order to increase the success rate of your startup, you need to focus on customer development. Here are a few principles that will increase your success rate:
Talk to users. To grow your business, you need to talk to potential users as much as possible, even if you have to do some things that won’t scale.
Don’t focus on nice-to-have features. What will help your business survive and thrive is to solve the main problems and frustrations of your customers. Focusing only on nice-to-have features won’t grow your business.
Lack of focus
Most businesses fail because of focusing on irrelevant things. Some of the things you should STOP doing right now include:
- Spending your time on social media and PR before you know you have the right product
- Partnering with others without proof of extra revenue
- Going to conferences
- Recruiting advisors
All the above are silent killers to your startup. The only two things you should focus on when starting your business are:
When starting your business, you can stay on track by developing a product and talking to users. Avoid getting caught up in other things.
Running out of cash
Regardless of how great your idea is or how passionate you’re, you will need enough cash flow to keep your business alive. You need enough money to pay marketing agencies, your employees, and to clear other bills. You can easily run out of cash if you fail to keep a clear record of accounts.
If your business has been funded by a private equity firm or any other investor, it’s important that you be aware of the KPIs to show your burn rate. Not achieving KPIs and making investments with low ROI will push your business down the drain,
- Your startup should keep track of your accounts and determine how long it can survive, given the current circumstances.
- You should explore all funding options available and secure funds before it’s too late.
- Always track the KPIs that your investors will look for when funding your business next time you need money.
- Always have more than one investor to increase your odds of getting funds to starting your business.
Today, most startups fail because they forget they’re startups. They are in a hurry to hire employees, release new products, get funded, and enter new markets. Unfortunately, approximately 70 percent of startups fail because of rushing and doing things out of order.
As they often say, slow and steady will help you win the race. Therefore, do everything step by step:
- Focus on knowing your target audience
- Consider the problems your product will solve
- Promote your product so that potential customers know it exists
- Market your product and get feedback
- Fix issues with your product and add features
- Only scale when the cost of acquiring new users is much lower
Reluctance to get feedback
Most entrepreneurs fail because they don’t want people to see their product until it is perfect. One of the main reasons why entrepreneurs make this mistake is because they’re afraid other people might steal their idea and because they’re afraid that their product won’t sell unless it’s perfect. However, failing to get feedback from potential customers is fatal to your startup.
You can avoid this problem by building a prototype of your product and getting feedback from users before you build your main product. Repeat this cycle until your potential customers demand your product.
How to Prevent Your Startup From Failing
As we previously noted, approximately 90% of startups fail. While this may be intimidating, you should focus on being in the 10% club of accomplishers. However, you can only join this league by following a few steps that have withstood the test of time.
Walk in the shoes of your customers
After starting your startup, you need to be closer to your customers and tell them what they need before they realize they need it. You can do this by communicating with the end-users of your product with whichever means that suits them most. Additionally, be ready to accept feedback and work to solve their issues and frustrations. Feedback is important, be it negative, as it will help you to build and modify your product.
Choose the right team
While it’s important to invest in the best talent, teamwork and intelligence will help your startup boom and flourish. Therefore, you should make sure that you have the right people, including your manager, marketer, IT expert, and professional staff. Together as a team, you’ll be able to maneuver any challenges that your business will face. Avoid having a one-man team.
Enhance your leadership Skills
To become a great leader that can steer your business smoothly, even during stormy times, you have to enhance your leadership skills. Great leaders keep their technology updated, and they’re flexible too. Additionally, your leadership skills will help you to motivate, communicate, and channelize your team’s energy to become more successful.
Starting a business is hard, and if you can navigate your business around the reasons why businesses fail, yours will flourish. Retain your calm, invest wisely, and increase your customer reach. Just because most startups shut down soon after they start doesn’t mean yours will close its doors.