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6 Reasons Why the Majority of Startups Fail

6 Reasons Why the Majority of Startups Fail

Startup companies are the pioneers of change, as they are responsible for creating new markets and improving old ones while earning a profit. But the success of startups is not something that comes quickly. It requires hard work and dedication. We always hear about the success stories, but it is important to know that about ninety percent of startups fail.

Several factors contribute to a startup’s chances of success or failure. Here are some of the most common reasons for startup failure.

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1. Not Getting the Best Team Together

One of the biggest challenges that startups have to face is putting together a balanced, strong team. Startups need to have diversity within their teams, but while achieving diversity, they often end up assembling a group that fails to work together. The success of a new business depends on having a dedicated workforce with a variety of skill sets. The people you hire should be able to share each other’s strengths while compensating for each other’s weaknesses. Choosing the best people when hiring the first few employees is a challenge that can make or break a startup.

2. Failing to Study the Market

Startups are built on ideas, but it is important to ensure that the core ideas and concepts are achievable and practical. Many startups fail because they try to build a business around just a concept. But consumers are not going to pay for just an idea. They want complete products that are functional and that solve a problem they have. Failing to do a thorough analysis of the market also leads many startups to invest time and money in developing a concept that is not a good fit for the market. Ignoring the realities of what customers want leads to failure, so it is important to analyze the market while implementing the idea of a startup if you want it to succeed.

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3. Creating Poor Marketing Strategies

Startups often fail to give marketing its due attention. Marketing is critical to the success of the business, so it is important to come up with useful and efficient marketing strategies. Businesses are only successful if they manage to attract customers, so it is essential to actively reach out to consumers through marketing. If you are selling energy-efficient refrigerators, then you can attract customers by sharing refrigeration guides that educate people about most energy-efficient appliances. There are so many offline and online marketing channels that you can use to promote your business.

4. Running out of Money

Money is also one of the primary reason for startup failure. New companies fail because they often do not take all of the required costs into account when they calculate the financial needs of their business. They come up with a starting cost and think that will be sufficient for running an established business. To plan ahead for your business, you need to think not just about start-up costs, but also about all the daily costs of running the business. You have to think about salaries, recruitment and other expenses. Plan ahead to make sure your business stays afloat, whether it is earning any profit in the first year or not. Getting a loan that will need to be paid back in the first few years of operation is also a bad idea. Most companies fail to earn big profits in the first few years, so make sure you have your financial costs covered if you want your startup to succeed.

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5. Not Investing in Security

Investing in business security is important, but most startups ignore it. The risk of failure is reduced if the business is secure. There are three types of business security you will need to consider: legal, insurance, and burglary/cybercrime. You should secure the physical premises from which you are working so that you can keep the startup’s property and equipment safe. You should also invest in cybersecurity for your business.

Insurance and legal protection are essential to minimize the risk factor in your business. Without adequate protection, your startup may fail to survive any setback it encounters.

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6. Losing Perspective

Startups can also fail because entrepreneurs are often so taken by their vision that they lose perspective. It is important to pay attention to trends in the market and to try to mold your image accordingly, because failing to adapt leads to many business failures. You should try to obtain investments from venture capital firms or angel investors who are familiar with your target market. That way, they can give you useful feedback and help you come up with better strategies.

It is important to spend some time understanding the reasons behind the failure of so many startups so that you can minimize the risk of failure for your own.

Featured photo credit: Bilan via bilan.ch

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Yasmin Rasidi

Copy Writer at Swotfish

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Published on September 8, 2019

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