90% Of Startups Fail for These Reasons

You are probably an aspiring entrepreneur, start-up founder or experienced entrepreneur with big dreams, innovative ideas and great plans, otherwise you wouldn't be reading this article.

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Alexander Bogaarts
Alexander Bogaarts
  • Marketing
  • Startup

If you're reading this article, you're probably an aspiring entrepreneur or startup founder with big dreams, innovative ideas and big plans.

If so, congratulations for staying true to your dreams. You are already a big step ahead of others around you. You take action and are actively looking for ways to grow your startup.

But hold on, future entrepreneur. Here is a persistent fact. There is a dark side to this story; 30% of startups fail during their first year, and another 50% collapse within the first five years. If you look 10 years later, 67% of companies are no longer active. The chances of success are therefore small, but this does not mean that you should give up immediately.

If we look specifically at startups, statistics show that about 90% of all startups fail to turn their company into "The Next Big Thing", a unicorn like Uber, AirBnb, etc. You probably know them 😉.

Why do startups fail? What is the probability that your company falls under the remaining 10%? What can you do to make sure your business doesn't fail like most startups?

That's what we're going to tell you today, with tips that you can apply directly to your startup.

Mistake 1: Wanting to do everything yourself

Sure, the idea of ​​a solo founder sounds exciting, but the hurdles, hurdles, and any start-up issues don't always make it worth it. It is not the efforts of an individual that make a company important, but teamwork and collaboration that enable its growth.

Where is it going wrong?

Starting a business is challenging, and setting it up all by yourself in a competitive industry can be devastating. It requires hard work, a lot of dedication and often it takes several people to set up a company. Entrepreneurs who go down this road alone often find themselves on a complicated path. Setbacks make it difficult to deal with all of this alone.

Having business partners or a team allows you to have different minds, and all together can make a significant difference. Just think how many ideas a team could get!

The solution

  • Collaborate with a co-founder to critically review your business plan

  • Enter a SWOT analysis from all interested partners before choosing a co-founder

  • First rate them on how they perform in a stressful situation, because this is going to be extremely important as your startup grows

  • Make the co-founder want to pursue similar goals so that you are on the same page

  • Involve a variety of people in your team, with different perspectives and skills that compliment each other

Mistake 2: Complicated business plan

Young entrepreneurs often complicate the business plan with sloppy presentation, vague plans and unrealistic assumptions.

Where is it going wrong?

For any company, no matter how big or small, a business model is the backbone. It is the fundamental building block that requires the greatest attention. A complicated business model is bogged down with unnecessary details and takes your focus away.

Such a plan sets wrong goals, poor benchmarks and creates confusion - all these elements are just enough to destroy a startup in the early stages.

The solution

  • Make a clear and concise plan together with a professional

  • Get feedback from potential investors

  • Collect constructive criticism of your plan before finalizing it

  • Review the plan regularly, look for opportunities for improvement and improvise where necessary

Mistake 3: Using the investment too soon

Investing a lot of money in the early stages of production can crush the company even before the product is introduced to the market. Fortunately, there are plenty of ways to look for opportunities that can help you land a firmer starting budget. If you have the money yourself, that is an excellent basis, but sometimes it may be necessary, for example, to start early with a Venture Capitalist to go into business.

Where is it going wrong?

One of the naive mistakes many startups make is to completely consume the first investment. These entrepreneurs make investments without any strategy. They try to scale the business as soon as they get a good chunk of cash, run into critical circumstances and eventually fail. Then you are too late and the startup can often no longer be saved. So be critical when spending money and make sure you work with parties that have expertise in the field of startups.

The solution

  • Build your startup using existing resources, e.g. bootstrapping by investing your own money and time

  • Bootstrapping helps the new entrepreneur to get to know and especially understand the ins and outs of the company

  • Be creative when recruiting staff and make smart use of interns, volunteers and by renting out your services where possible

Error 4: Waiting too long for the product to be released

Emerging companies often underestimate the power of reaching a threshold. They wait too long because they want to make the launch perfect with a clean flawless website. In practice, this means that the concept loses its lead and competitors may already offer solutions.

Where is it going wrong?

Many startups wait too long for launch, and by the time their product hits the market, the size of what they've built runs out. They spend too much time and resources making their development stand out, and yet the outcome is negative in the end. Some companies wait months and years before introducing their prototype.

By waiting too long to reach “perfection,” these startups miss out on crucial customer feedback that could help them develop a better product.

There is a beautiful quote from Reid Hoffman: If you're not embarrassed by the first version of your product, you've launched too late - aka; If you are not ashamed of the first version of your product, you launched the product too late.

The solution

  • Stop underestimating the value of an MVP (minimum viable product)

  • Your first draft may not be the prettiest, but as long as the customer has it in their hands, you're one step ahead of everyone else when it comes to getting feedback and making improvements

  • Launching early (or in beta) allows you to hit the market and test your idea with real customers

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Error 5: Ignoring user feedback after launch

It is 100% certain that your startup will fail if you condone user feedback and do nothing about it. The feedback is a gold mine for an emerging company. Dig in more, go to the roots and make the product better with this feedback!

Where is it going wrong?

This is the most simple and obvious reason why startups fail. Once you have launched the first version of your product, you should always take user feedback seriously. Have the courage to accept negative feedback. Not paying attention to user feedback is your startup's guaranteed killer.

The solution

  • Be open to negative feedback

  • Analyze users' complaints, find the root cause and use this feedback to fix any bugs

  • Be honest and open about your progress when making the changes

  • Develop a good relationship with users by listening to their needs and improving the product

Mistake 6: Hiring the Wrong Employee(s)

Small businesses often choose cheap labor over a skilled and experienced worker, which is the biggest mistake you can make as a growing and emerging company.

Where is it going wrong?

Employees are an asset, especially for a company that has yet to establish its name in the industry. Your organization's goals, project success rate and service quality depend on the efforts of the employees. The majority of startups tend to compromise in these areas and choose unskilled workers to reduce (production) costs. This is exactly where it goes wrong. As a result, your startup will face financial losses and consumer complaints. So you better avoid this!

The solution

  • Plan your recruitment strategy and ensure a robust employee screening process

  • Choose a skilled worker over anything else

  • Check the candidate's background, work references and education details

  • Determine the skills and strength required for the respective roles and train your employees for the position

Mistake 7: Lack of direction and focus

How come two companies in the same industry perform differently, even if the resources and opportunities are the same? Both have twenty-four hours a day to work, and yet one fails while the other succeeds. The answer is simple: the failing company lacks focus and direction.

Where is it going wrong?

This is one of the most common causes of startup failure. Not having the right direction and focus can really hold the business back in the long run. Companies make a wrong move when the board (usually the co-founders) makes a specific decision without evaluating what that decision might bring them. The decision could be about anything, but its impact could pose a potential threat to the business.

One of the most common mistakes is that startups spend money to launch social media campaigns and PR campaigns before the right product is ready for the customers and target group.

The solution

  • As a start-up, don't let your focus shift in different directions

  • Concentrate on only two things: your product and your customers

  • Stop wasting time and resources on things you don't need

Mistake 8: Trying to Grow Early

Trying to grow early is without a doubt one of the main reasons startups fail. The statistics show that out of 3000 startups 90% failed due to inadequate and premature forced growth.

Where is it going wrong?

Organizations that rush into premature scaling are the ones that fail miserably. They spend more money than they need to while chasing the idea that money can bring everything. These types of startup founders certainly have enough financial resources, and they are probably doing well from a business perspective. Still things go wrong because they don't follow the correct order and try to skip steps.

Some examples include expensive marketing, leasing offices, perfecting products with expensive technologies, and usually doing all the kinds of things large, resource-heavy companies do. A startup without sufficient financing cannot bear these costs and should not want to.

The solution

  • Don't scale up unnecessarily. Do what it takes

  • Manage finances well and monitor cash flow

  • Make sure to hire an experienced and skilled accountant who will identify errors early

  • Decrease the cost of acquisition, increase sales, make a profit and then use the capital for secondary expenses

Mistake 9: Not having a customer-centric approach

If you want your startup to fail, there's one magic formula: divert your attention from the customers and take a non-customer-centric approach.

Where is it going wrong?

I probably should have put this one on the top spot. But here's one reason why I choose to finally post it. Remember the 'ultimate rule' to have a successful business. It's like a do or die rule that all companies swear by.

One of the most common mistakes young startups make is developing a product or service just for money. Of course, the ultimate goal of all businesses is to monetize their products and increase their revenues. But can you name even one company in the world that generates high revenue without providing the customers with anything useful? Exactly, that's impossible.

Need I say more?

The solution

  • Create products and services to solve your customer's challenges, problems and frustrations

  • Your business process must be customer-oriented and not 'money-oriented'

  • Reach your customers. Communicate with them and embrace their feedback

  • Improve, improve and adapt your services/products based on the needs of your customers

Conclusion

Many startups will arise and many will disappear. The one that stays in business is a company that avoids all of the above mistakes and chooses customers over premature scaling. Focus on teamwork and make sure you can take on the challenges together.

Your business can succeed in the long run if you avoid all the common mistakes startups make. Even if you've made these mistakes, it's never too late to take action and fix the issues with an effective problem-solving strategy.

Let's make something great together