Top 8 Reasons Why Startups Fail

By admin | July 13, 2016 | No Comments

why startup failure ?

Startup culture is growing rapidly all over the world with startups coming up all over the country.
here are a lot of positives but the fact remains that 80% of startups fail.
There are multiple reasons why a startup fail and after going through much of the web, I came up with a list of main reasons behind startup failure.
1. Building a wrong product:
Building a product without actually validating the product idea through potential customers is a bad move. And so is building a product that solves a trifle problem in a customer’s life rather than one which is the major pain source for them.
2. Wrong Team :
Often in a hurry to launch their product early, startups tend to build teams with people who have little or no interest in the product idea. This leads to product failure as the people working never give their best for the product.
3. Poor Management :
Many a report on business failures cites poor management as the number one reason for failure. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees. Unless they recognize what they don’t do well, and seek help, business owners may soon face disaster. They must also be educated and alert to fraud, and put into place measures to avoid it.

Neglect of a business can also be its downfall. Care must be taken to regularly study, organize, plan and control all activities of its operations. This includes the continuing study of market research and customer data, an area which may be more prone to disregard once a business has been established.

A successful manager is also a good leader who creates a work climate that encourages productivity. He or she has a skill at hiring competent people, training them and is able to delegate. A good leader is also skilled at strategic thinking, able to make a vision a reality, and able to confront change, make transitions, and envision new possibilities for the future.
4. Business Location :
Your college professor was right — location is critical to the success of your business. Whereas a good business location may enable a struggling business to ultimately survive and thrive, a bad location could spell disaster to even the best-managed enterprise.

Some factors to consider:

– Where your customers are
– Traffic, accessibility, parking and lighting
– Location of competitors
– Condition and safety of building
– Local incentive programs for business start-ups in specific targeted areas
– The history, community flavor and receptiveness to a new business at a prospective site
5. Poor Allocation of Resources and money:
Where startups often fail is not having a proper plan in place about how many people they need to hire, when is the right time, and which teams should be invested in at the first stage.

Startups that run out of resources also usually do so because the founders don’t want to give up a piece of the pie, the budgets were not planned properly, the burn rate was too high, or it just took longer to raise the first round than initially expected.

6. No business plan:
You might wonder why I have put this at number nine. But it is indeed comparatively less important than the above listed eight reasons. Every startup once sure of their vision, and having got a mentor, must create a business plan to articulate every single aspect viz. customer segment, distribution channels, cost and revenue models etc. of their business. Business plan will give you a clear idea of your operations. Failing to create a business plan might lead you to lose one or other important aspects of your startup.

7. No Website:

Simply put, if you have a business today, you need a website. Period.

In the U.S. alone, the number of internet users (approximately 77 percent of the population) and e-commerce sales ($165.4 billion in 2010, according to the US Department of Commerce) continue to rise and are expected to increase with each passing year.

At the very least, every business should have a professional looking and well-designed website that enables users to easily find out about their business and how to avail themselves of their products and services. Later, additional ways to generate revenue on the website can be added; i.e., selling ad space, drop-shipping products, or recommending affiliate products.

Remember, if you don’t have a website, you’ll most likely be losing business to those that do. And make sure that website makes your business look good, not bad — you want to increase revenues, not decrease them.
8. Poor Investor Management:

As a founder, you have to manage your investors. You shouldn’t ignore them, because they may have useful insights. But neither should you let them run the company. That’s supposed to be your job. If investors had sufficient vision to run the companies they fund, why didn’t they start them?

Pissing off investors by ignoring them is probably less dangerous than caving in to them. In our startup, we erred on the ignoring side. A lot of our energy got drained away in disputes with investors instead of going into the product. But this was less costly than giving in, which would probably have destroyed the company. If the founders know what they’re doing, it’s better to have half their attention focused on the product than the full attention of investors who don’t.

How hard you have to work on managing investors usually depends on how much money you’ve taken. When you raise VC-scale money, the investors get a great deal of control. If they have a board majority, they’re literally your bosses. In the more common case, where founders and investors are equally represented and the deciding vote is cast by neutral outside directors, all the investors have to do is convince the outside directors and they control the company.

If things go well, this shouldn’t matter. So long as you seem to be advancing rapidly, most investors will leave you alone. But things don’t always go smoothly in startups. Investors have made trouble even for the most successful companies. One of the most famous examples is Apple, whose board made a nearly fatal blunder in firing Steve Jobs. Apparently even Google got a lot of grief from their investors early on.


If you think there might be other reason also then please write in comment box.

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