10 Reasons Why Most Startups Fail


9/10 startups fail. While that’s a pretty high rate of failure, why do so many startups fail?



Most founders never really understand why their startups fail. Some play the blame game, others blame the economy, and a very few others take the blame themselves.



Watching your new business fail is extremely sad. It’s even worst if you don’t really know why it failed. Here are 10 reasons why most startups fail:



1. Nothing is Tested


Many innovators think they have a great idea and decide to create a business out of it. However, what’s a great idea to you isn’t always so great to others.



Before executing your ideas, you need to talk to your ideal customers. Get their thoughts on the idea and see if they have any resistance to it. Ask them to openly criticize the product and provide any input they can so that you can create a stronger product.



I have seen so many startups fail over the years simply because two people thought it was a great idea. They never tested their business model, pricing, or even marketing strategies. A few months later, they were not making any money and were disappointed.



McDonald has spent over 6 figures in testing the chairs they have at their fast-food restaurants. They wanted to create a chair that was comfortable for ONLY 15 minutes so that people would not stay too long. It took years of testing, thousands of dollars, and a lot of customer feedback to get the right chair.



2. Lack of Discipline


Most entrepreneurs usually worked for someone else their whole life. Without having someone to tell them what to do, they lose focus. Discipline is extremely important in creating a successful startup.



You need to have a clearly defined schedule and strong work ethic that will compliment your business. Many startups fail because the founders lose focus within a few months. Follow a routine and never lose sight of the big picture.



3. Small Niche


At the end of the day, a startup is only successful if they are able to generate revenue. Most small businesses compete with larger companies by specializing in specific niches. However, the more specific your niche, the smaller the market.



If you’re creating a product that only appeals to thousands of individuals, it’s going to be a challenge to break even. Find the specific market you want to approach and do the appropriate research.



You need to figure out how many individuals exist in your niche, where they live, and how you plan to market yourself to them. Not doing so can be disastrous to the success of your startup.



4. Grow Too Quickly


Many startups want to grow, grow, and grow some more! Growth is great for a business, but only if it comes at the right time. Uncontrolled growth can be detrimental to the success of your company.



You need to completely dominate your original plan of action before expanding. Many businesses see a short string of success and decide to expand right away. It’s always good to plan for expansion, but you should wait until the time is right.



Expanding the business rapidly causes an increase in costs which most businesses cannot sustain for a long period of time. Not only that, but the individuals within the organization are forced to shift focuses, which can be dangerous.



5. Horrible Pricing


It can take years to find the successful price points for your products or services. If you price your product too low, people think it’s cheap and therefore lacks quality. If you price your product too high, people are skeptical to pay so much and look for a cheaper alternative.



Pleasing your customers is an extremely difficult task, but there is nothing better than a loyal customer. Even if a pricing model seems to be working, it never hurts to continue experimenting. Improvements can be made on anything.



6. Don’t Discount, Add Value


Many business owners feel the urge to discount their products or services. Unless you are selling something pricey, try to avoid discounting your products.



Instead of giving them a discount, find a way to give them something along with their purchase. When I was selling websites, I often gave them a free online marketing guide to close the deal.



People love freebies. Find a creative way to keep more money in your pockets while giving your customers more to take home. Many startups are not sustainable for a long period of time because their margins are too low.



7. Giving Up Easily


For some reason, many entrepreneurs feel like they have to be successful overnight. The moment their startup doesn’t work out as planned, they begin to panic and get discouraged.



Creating a successful startup is a daunting challenge. You cannot create something amazing overnight and you need to stay persistent in order to succeed. Many brilliant innovators like Steve Jobs and Thomas Edison struggled for years until they were able to successfully execute their vision.



8. Lack of Planning


Launching isn’t everything. It’s actually only the beginning of your journey. Many people tend to plan until the launch date and expect results to magically appear. Unfortunately, that rarely happens.



Before you begin any work on your project, you should have a roadmap of how you plan to execute your business for the next 12 months. Preparation plays a vital role in the success of a business.



If you have a concrete plan on how to achieve success for your business, you are more likely to accomplish just that. Never ‘go with the flow’ in business as you will end up wasting time and hitting tough road blocks.



9. Make Money Later


After watching the ‘Social Network’, many people want to take a Mark Zuckerburg-like approach in monetizing their business. Unless you feel comfortable in acquiring millions of users with little marketing efforts, you should really come out of the gates with a plan to make money.



One of the biggest mistakes I made as a young entrepreneur was not worrying about making money. Even though my passion towards my ideas were great, it was horrible to come up with a monetization plan later.



Till this day, I have had challenges on finding the proper way to make money for that company. Even though I believe it is at a good place now, I could have avoided all that trouble had I created a monetization plan before launching.



Eventually, your business has to make money for it to be a business. Even non-profits are making money. Never lose sight of how important making money really is for your startup.



10. Poor Management


The driving force behind any business is the team that makes it all happen. Entrepreneurs don’t always make the best managers. Creating great products and managing people are two very different qualities.



Many times, entrepreneurs want to avoid costs and decide to manage the team. If you cannot get your team to perform at a high level of efficiency, you’re losing money. Not only that, but retaining a group of loyal employees can be extremely hard if people don’t like the manager.



Find someone who is good with people. Put them in charge and do what you do best. You will have a team of people performing at a much higher level while keeping your head sane.





Creating a successful business is a lot more than a good idea. For some reason, many entrepreneurs believe that all good ideas succeed. Unfortunately, it’s not that easy.



If it was, there would be a lot more millionaires than there are today. However, if you avoid making some of the mistakes listed above, your chances at success increase drastically.



photo credit: plewicki via photopin cc

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