Creating a startup is not an easy task. The world is constantly changing, as well as society and the market, which implies an uncertainty that is linked to the fear of failure. The conventional, although it has served for years, is no longer enough to excel and reinvent and adapt, they have become important factors for the survival of startups.
Thus, many startups have managed to create new markets, revolutionize industries, and question conventional business models, achieving success. When this happens, there are so many positive and inspirational anecdotes about the entire process lived to get to that point. However, this is not the common reality in this environment since a high percentage of startups fail before even reaching two years, either because they failed to overcome obstacles or make the right decisions, which leads to failure.
5 Reasons why startups fail.
Therefore, below, we present 5 reasons why a startup can fail:
Not knowing the market and the public can be fatal for a new business because we do not know our competition, the needs, and the demand of our potential clients. If this happens, we can find ourselves in front of a market already saturated by other similar goods and services, making ours do not have enough value to motivate them to be acquired by the public. It can also happen that there is no strong market for our products or that we are targeting the wrong audience.
The business model
Not having a possible and viable business plan is taking a direct path to failure. In relation to the previous point, knowing the market is important since it helps us to develop a business model that focuses on a real need, a specific and identifiable audience, in each space. Thus, our business model has defined objectives that facilitate our decision-making, especially financial ones, without the need to improvise and thus be able to achieve a solid customer base using the least number of resources possible.
The work team
A good team is essential to avoid failure. Having people who are trained, effective and above all committed to a project can make a difference for the growth and development of an idea. Similarly, it is necessary to define the responsibilities of each member so that everyone can work together and contribute value proposals that serve the development of the startup.
A bad communication proposal can result in the failure of a new business since it does not allow you to make yourself known to your target audience or capture the attention of potential customers or convert them into real customers. In this sense, it is necessary to have a good communication strategy and to be able to invest in different channels such as digital – understanding the rise of social networks and technology.
Running out of money is one of the worst situations a business can face. For this reason, from the beginning, it is essential to have a budget that reflects the capital that the company has and all the necessary expenses, as well as for unforeseen events since the market can be volatile, especially for a business in its early stages and you need to have the ability to deal with them, at least until they manage to secure an external investment.
Startups’ failure rate
Different studies indicate that at least 9 out of 10 startups fail, which can be a source of discouragement for those who wish to undertake this path. However, according to Forbes, these figures are not real since according to Cambridge Associates records, the percentage of startups that fail has not exceeded 60% since 2001.
Of this percentage of failed businesses, the most common reason – around 42%, is because they offer a product or service that is not demanded or necessary for the public, so the public does not invest their money and therefore, the startups cannot get ahead.
These are just some of the reasons that could lead a startup to failure. However, it is important not to be discouraged by this situation as it is part of the process and experience, which means a learning opportunity for the future.