5 REASONS WHY STARTUPS FAIL
About 25% of all startups fail within one year of operation. 50% of all startup fold up by their 4th year of operation. Reasons for such failures are near and wide, the major one being attributed largely to incompetence.
The Team Doesn’t Have The Required Skills
46% of all startup failures can be attributed to incompetence, which is to say the team does not have what it takes to succeed in their chosen business. One of the most profound challenges faced by startups is how to get their team right. Top level financiers and venture funds always want to be certain those behind a company are capable of delivering results. A good entrepreneur will look for partners that complement his weakness and add value to the company as a whole.
Product Doesn’t Serve Any Defined Market
Business is subject to the classic economic law of demand and supply. There must be a clear demand for your product or service for your startup to survive. Without a clearly defined market need from your product or supply, your startup has no chance of survival. Most business has folded up simply due to the non-existence of demand for their product. An idea may look good, a product may be nice, but that doesn’t guarantee the market will accept it. Merely identifying a product you can produce or a service you can offer is not a guarantee for jackpot. Most importantly you must have an in-depth understanding of your market even where there is an obvious demand for your product. Who are you competitors and why do clients’ patronize the product/service. If you don’t understand where you are going, you will probably end up somewhere else.
Poor Cashflow Management
Many a student entrepreneur aiming to climb the success ladder, there is one rule you should never forget. Cash is king! Without it, your new startup will grind to a sudden halt. This is the reality of most startup that fails when their startup cash dries up. As a student entrepreneur you must quickly abreast yourself with the importance of maintaining constant liquidity in your new business.
Businesses that fail in this manner are not necessarily insolvent. They miscalculate and invest their cash in areas that are less pressing such as renting a bigger office when you could do with a smaller office, employing staff you do not need, Stocking up raw materials you may not necessarily need now, Paying upfront for everything when you could negotiate for a discount or get suppliers credit. You must know that once you ran out of cash, the very survival of your company will be threatened.
Making Money the “Only Reason”
This is an important benefit for entrepreneurs but let it stay as a benefit. Don’t let becoming rich be the only reason you are in business. Many businesses have failed simply because monetary gains are the only driving focus of their business. Such misplaced focus will affect every aspect of your business including how you treat your clients, how you price your products/service and the value you deliver to your clients.