Reasons why startups fail


Reasons why startups fail

If you are thinking of starting a new business you will definitely think about the number of startups that fail both in the short and long term, unfortunately business failures are common, about 20% of small companies fail in their first year , 50% will fail within 5 years, and 33% Fail after 10 years or more, to protect your company from failure, you must know the reasons for business failure, and we will mention to you at the end an example of a large company that failed and returned to success after knowing the reasons for failure.

Reasons why startups fail

Running a business is not for the faint of heart. Entrepreneurship is inherently risky. Successful entrepreneurs must have the ability to mitigate risks for the company, while offering a product or service to the market at a price that meets consumer demand levels.

But why do companies fail? And what makes an entrepreneur succeed, and another suffer a business failure? If you want to succeed in your business, you must know the reasons for the failure of startups that we will mention now.

Lack of an effective action plan

If you don't have an effective business plan, you won't be able to properly communicate your vision to your team. Too often, entrepreneurs think that it's easy to build a product, create a service, or a website, and gain customers, but it's hard to achieve without Clear and effective action plan. The business plan focuses on discovering a scalable way to gain more sales, and generate better income.

Not hiring the right people

Hiring the right people has a huge impact on almost every area of ​​your business, one of the most obvious examples is sales. Sales representatives are the key to increasing sales.

Many companies also fail due to poor inventory management, if they have to hire someone skilled in inventory management, or use good inventory management software.

do everything yourself

Yes, you are an entrepreneur, but that doesn't mean you have to do everything on your own. A strong business depends on trusting others and this is an essential leadership trait. If you want to control everything, you probably won't succeed in the long run.

Delegating is a skill that must be mastered to effectively run a business. It helps you manage your time, focus your energy on what matters most, and identify emerging potential leaders within your company.

Not adapting to market changes

Entrepreneurs who fall in love with a service or product and refuse to change it are likely to fail to meet the trends demanded by the market. The key to long-term success is flexibility and a willingness to change when necessary.

lack of innovation
The failure and success of startups is linked to two main factors: innovation and marketing. 

Innovation means finding a new way that is better than any other company to meet customer needs. 

Any entrepreneur can make some money in a short time, but if you want to become successful and maintain that success over the years, and decades, you must find a way to add more value than any other person or company, and this only comes through continuous innovation.

Ineffective marketing strategies

Whether your company is big or small, marketing is the step that will determine the path to success or failure. If you can't find a way to market your product or service, your business will have a hard time getting off the ground. 

You could have the best product out there, but it doesn't get a good percentage of sales because of marketing strategies that don't work. For example, McDonald's has the best burger in the world? Probably not, but their marketing strategies are very special, which is why they are quite successful.

Not having enough funds

Startups need enough time and money to run smoothly. There is no answer as to how much money an entrepreneur needs to spend on their business. But it can be argued that many startups fail due to insufficient funds, and a number of them fail because they are unable to raise additional funding.

competition anxiety

It is common for any company to face great competition from competitors however, startups should not pay much attention to competition. This does not mean that companies should not worry about competition, but that there should be a balance between being overly concerned about competition, and ignoring it.

Expensive product prices

The pricing of the product must be appropriate for a startup to succeed, if the product is too expensive it may fail to attract more customers. The price can only be high if there is a significant benefit to the customer, as long as it makes sense, in which case customers will not complain about the price of the product.

How did Apple overcome its failure?

Everyone hears about Apple, one of the most valuable companies of our time, with a market capitalization of more than $2 trillion. But it wasn't always this way, as Apple is actually the best example to look at when thinking about why startups fail.

Apple founder Steve Jobs was fired from the company in 1985 only to return to it in 1997 when the company was running at a loss and sliding toward bankruptcy, so that Michael Dell (businessmen and CEO of Dell Computers) advised decision makers to shut down Apple and return the money to shareholders.

But Apple persisted, and Steve Jobs asked himself one of the most important questions of his life, “What business do we really do?” At first, the answer seemed obvious, since the company was in the computer business, but how was it supposed to win back customers.

That's why Jobs asked himself a second question, "What business should we be in?" This question helped change Apple's life. The company moved on to building core technology that connects people with what they love, as the company arranged a partnership with Microsoft and Apple launched the iMac just a year later.

For the company to return to profits and leave its mark, then soon the iPod, iPhone, and iTunes appeared, increasing their net sales profit. Since then, Apple has never stopped innovating, and its marketing campaigns have propelled the company into a whole new world.

Today, is Apple only working in the field of computers? Only 10.4% of their business is computers, which means that 90% of sales are for iPhones, iPads, and Apple Watches, which is clear evidence that they have adapted to market changes.