Why do 90 percent of start-ups fail?

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Start up ventures are quite hard to start and once it gets to started, 90 percent of them does work within the initial three years. There are several factors which influence the start up business. Moreover, entrepreneurs also neglect some serious and crucial elements that lead to the failure of their start up venture. However, smart and intelligent entrepreneurs learn from their mistakes and avoid them to repeat in the future.

Hundreds of entrepreneurs pitch their visionary and innovative ideas through engaging presentations and sleek slide decks. They experience a lack of market knowledge, lack of market and product fit, wrong selection of the team, poor management committee, failure of business strategies and business models and many more! Here is the list of some reasons that are considered responsible for the failure of a startup business. Scroll down to read more…

Reasons responsible for the failure of a start up venture

Reason #1 Market issue

Almost every starts up venture is driven by the market. Marketing factor is the major reason for the failure of such ventures. Startup ventures usually face the problem of little or almost no market for their products which they have manufactured. However, the market size of the people and a large amount of funding also affect such business venture.

Solution: Before starting up any venture, go out and talk to people about the product. Moreover, also make proper research of your industry, analyze them and make changes in the initial stage; as it is quite easier and cheaper to make changes in the beginning.

Reason #2 Failure of business model or business plan

A business model is like the skeleton of every venture. It dictates the economic and commercial viability o your startup venture for generating value and money. The incompetent and weak business strategies, plan and business model are directly responsible for the failure of such ventures. Inefficient and ineffective business models are featured by the low or unknown lifetime value of the customer, high cost to attract customer, and no measurable ways to gain a customer.

Solution: Try to analyze customer acquisition strategies properly and make them scalable. The costing involved in the acquisition of a customer should be recovered within twelve months from the customer. Moreover, make the actual estimation of your return on investment and sales cycle as well.

Reason #3 Poor or inefficient management team

Management is the brain and heart of a company. All the important and influential decisions are taken by managerial persons. Poor and weak management team exemplifies ineffective and incapable strategic decisions, no or very little work on product market fit, the communication gap between team members and management committee and inefficient recruitment system.

Solution: There is a solution to overcome with this problem. Try to make people answerable to each other’s decisions by facts and data; not by biased experience. The management team should own its decisions and maintain a healthy communication with its team members; because an over communication is always better than under communication.

Reason #4 Running out of cash

A proper and continuous flow of cash helps in keeping business alive; irrespective of the number of users, how great your own innovative idea, paid dues, clearing bills and marketing agencies. However, some entrepreneurs fail in maintaining a proper record of accounts. This results in the failure of their startup venture.

Solution: Maintain a proper track of accounting records and should work to explore all funding options and security of funds.

Reason #5 Product related problems

In this competitive market, customers make a comparison of your product with other competitive products available in the market. Developed and high tech products had taken the market to the new level and had ruined the customers for eternity. If the products had a bad interface then you need to take a bit of time for processing and gathering more information to uplift the quality of the product. It is also important that customer should differentiate your product from other available competitive products, not just for its value but also experiences.

Solution: Try to understand the crucial factors of product development such as engineering and designing.

Reason #6 Poor marketing

Marketing is not about making people aware more and more about the features of the product; but it also creates a marketing element within the product and allows exploring unexplored venues such as retargeting and influencer marketing.

Solution: Marketing should not begin with the completion of the product; instead it should start much before manufacturing of the product. It should also involve customer experience and product development as well.

Reason #7 Loose focus

Losing focus may lead to distraction and waste of resources as well. Moreover, micro management is also responsible for losing focus from the business venture.

Solution: Solve the issues first and maintain focus on the right track. Do not get away with new and innovative ideas and features. Along with a to do list, make a to not to do list.

Reason #8 Legal challenges

The most important thing of a venture is to realize the value of data security and customer privacy. Once a venture grows, they get exposed to several legal challenges. It is mandatory for a start up venture to be aware of every rules, regulation, and legal laws; as every field have different governing rules and laws.

Solution: You can have a consultation with an experienced lawyer. It will not only save your time, but also save your money in the later period. Moreover, you should also keep the venture and employees compliant with rules and regulations.

Reason #9 Bad debts

Most of the start up ventures agree to work on a credit basis in the initial days. This often makes the condition more critical or even worst for the new venture. It is quite difficult to avoid credit request for showing initial traction. In such situations, if you face financial crunches or your client get mischievous then surely your start up venture will suffer.

Solution: To avoid the issue of bad debts in start ups, before issuing credit make sure to analyze client reputation and credit profile. You should take cheques of post dates and if they get bounced, then follow the procedure of recovering the amount through cheque bounce.

Reason #10 Burnouts

Most of the founders of start up ventures could not take burnouts and ultimately quit! Sometimes, it took two or more years for the product to get fit in the market which makes the financial situation and work life balance suffers at its extreme.

Solution: Start up is the dream of the founder. Try to understand the target and maintain work life balance.

Hopefully, you will surely avoid such problems and will have a good and flourish start up venture.

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