In this blog, we are going to discuss the most common reasons behind the most startups fail.
The perception in business indicates that only 1 in 5 non-funded start-ups reaches the unicorn status with an at least worth of $1 billion. And, the number is 1 in 10,000 for every funded start-up. The reason behind the success of start-ups is the independence of entrepreneurs that plays a major role in their triumphs. For example, the company that provides funds to a new business will intervene in its every matter. Conversely, non-funded business solely runs according to the decisions of the entrepreneurs or owners.
5 Reasons Why Startups Fail
Following are the top 5 reasons why do most startups fail:
Launching Product with No Market Demand
Most companies assume that their product is so attractive without doing any research. Companies expect a wide flow of money just after the launch. However, once the product comes into the market, a different scenario is witnessed.
Startups have to look into and do research to find the needs and wants of their targeted audience. Entrepreneurs can also do beta-testing, selling products on trials to check the response of the audience to avoid a complete failure.
Founders and Employees Lacking the Required Skills
Many founders have no idea what to do to take off the business. Initially, they should concentrate on industries and pursue a job in it to get the required skills. Educational background generally does not play a major part in the success of start-ups. This will enhance their chances of success. The dedication and practice they put into the company will not become a burden for them. Asymmetric skills and salary packages of the management members also set the scene for professional jealousy.
Always include some good people at sales, someone first-rate at bookkeeping and management, someone good at advertising and marketing and someone good at the development of a product. Business development, customer service and legal in-house workers can land on the firm in a second phase. A well-balanced team is the backbone of the business.
- Also checkout: How to get investors for a business?
Cash Burning
Start-up founders are generally technicians and engineers, so they usually want to create the perfect product or solution for one problem while launching it. It can be a big problem because such approaches open doors of cash. Typically, key signs that identify cash flow problems are low-profit margins, high salary costs, small recurring purchases, delayed customer payments, and high-interest rates that the company pays. It is not necessary to pay the suppliers instantly. Always try to bargain terms with them that are longer than the terms of payment you offer to your customers.
Entrepreneurs also waste money on decorations and flaunting the office infrastructure. Ask yourself if the trade show or luxury office is really important and what return it gives on your investment.
- Also checkout: Small Business Ideas List in Pakistan
Poor Leadership and Weak Team
Every stage in a business needs good leaders who have the charisma and track record to inspire their subordinates. They provide the vision for the company and the mechanism of hiring employees who are committed. Such employees play a fundamental role in achieving the company’s mission.
Executives are one of the most valuable employees a company can have. Most workers report to executives indirectly. They can build or break your company. Hire executives with exceptional interpersonal and functional skills. You can also hire a company that provides executive search services to help you with the recruiting.
The inability of Founders to getting Capital
People might be surprised by the time and number of rejections it takes before you can get the capital required. Generally, this process starts too late, and entrepreneurs rely on the wrong group of investors first. Raising money for a start-up is a matter of at least six months of active prospects, meetings, calls and visits. The more often you raise money, the more accurate you are about what you need as a company and what investors want in your profile.
You must form a working committee responsible for this consisting of a minimum of two persons who fall under the top leadership.
- Also checkout: How can Entrepreneurs Enhance the Business Growth?
Take Away
It may look easy to initiate a business, but it is not. Most start-ups do not succeed because of the same mistakes most entrepreneurs commit. Combating the above five common mistakes will help you in persisting your start-up for the long run.
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