Creating a startup is an exciting time for entrepreneurs. It’s an opportunity to create a unique new business that has the potential to thrive. That being said, creating a successful new company does come with its own set of challenges. That’s why it’s not uncommon to hear of instances in which startups fail. However, knowing the main reasons why startups fail can help business owners avoid potential problems and ensure that their company makes a success of itself.
These are the many different reasons that startups fail, however these are just a few of the most common ones:
Poor Market Research
One of the most common reasons that startups fail is due to a lack of market need for their product/service. It’s essential to ensure that there is a gap in the market for the product or service that you’re planning on offering, and that you tailor your marketing campaign in line with this. It’s crucial to know the needs of your market audience and target your marketing accordingly in order to generate interest in the company.
Lack Of Team Management
As the saying goes, “teamwork makes the dream work” and this couldn’t be more true than when it comes to starting your own company from scratch. It’s the commitment, skills and passion of your team that will get the company up and running. It’s important to ensure that your team has the necessary skills, but also that you have the correct management systems in place. It’s essential that the team can co-operate and is managed effectively to organise resources and skills efficiently for the good of the company.
Insufficient Financial Resources
Money is the lifeblood of any company and so you probably won’t be surprised to hear that another one of the main reasons that startups fail is due to lack of financial resources. Specifically, in the growth phase, it’s not uncommon for companies to lack capital. Often startups fail for this reason if cash flow is not monitored correctly. Keeping a close eye on finances and aiming for financial milestones is key to staying on track.
Strong Competition
Competition is a challenge faced by any business, however strong competition can be a particularly big issue for new companies, and often a reason that startups fail. It’s especially hard for new companies to compete against established companies that already have a loyal customer base. In order to stand up against this competition, it’s essential to ensure that your startup is unique, and is marketed effectively to celebrate its unique selling points.
Flawed Business Model
Another key reason that startups fail is due to a flawed business model. It’s crucial that the business model is realistic and puts milestones in place that are viable and achievable. Key considerations include finding a scalable way to acquire customers and thinking of ways that you can monetise those customers at a higher level. Whilst you want to be optimistic in your business model, a key reason that startups fail is when their vision is not realistic or well thought out.
How To Avoid Failed Startups
Knowing the main reasons why startups fail is crucial in preventing your new business venture from running into trouble. This means you can spot signs of trouble early on and take the necessary action. Aside from being aware of potential problems, you should also consider the following:
- Do thorough market research
- Have a solid business plan
- Maintain accurate financial records & monitor profitability
- Hire a good team
- Manage your risks
If you are concerned about your new company starting to fail, don’t hesitate to seek professional business rescue advice. Our experienced team at Ballard Business Recovery can talk you through the best options for taking your company forward. Don’t hesitate to get in touch with the team today.
