The majority of startups will fail within the next several years. Some businesses fail right away, while others have brief success before they crash and burn. No matter the reason, many startups sink before they can swim. Social media and crowdfunding make it easy to start a business. There are many aspects that affect business’s success, such as demand, economic swing, and market factors that are out of their control. However, there are business features that new entrepreneurs can control to avoid startup failure.
Research and Planning
Startups that do not have a business plan and direction fail. Without research, you do not have a good grasp on what the market wants, and your product is not suited for the market. New entrepreneurs think that many users mean profitability, but that does not equate to revenue. In order for user numbers to translate into profitability, startups need to define value proposition and why your product is different from the competition. Long term planning keep startups on track for success. It helps navigate unexpected challenges that businesses face as they grow.
Underfunding and Overfunding
Businesses need capital in order to start. However, underfunding causes serious and sometimes fatal consequences. It can be the reason businesses fail to meet customer demands. It is better to wait until you have enough funding than launch a watered-down version of your product. Overfunding also causes problems for startups, because it produces tremendous pressure to perform well. A good example is SearchMe a text-based search engine launched in 2009 that had raised more than $45 million. The market at this time was largely untested and SearchMe was unable to produce results fast enough, causing disappointment and resulting in failure.
Ignoring What Your Customer Wants
Customers are the reason why you are in business. In fact, businesses exist to satisfy their customer’s wants. The problem occurs when businessmen fall in love with their vision and fail to see the market’s needs. Take ZipCar, a simple way to rent cars short term, and GoLoco, a ridesharing service. Both companies provide a unique way to access transportation in major cities. Go Loco’s cofounder, Robin Chase, later admitted that he made a mistake in creating GoLoco saying, “we built the website first and asked our customers about it later”.
Poor Management
Poor management is often cited as the top reason why startups fail. New entrepreneurs usually lack management and business skills in finance, production, purchasing, hiring and managing employees. Unless entrepreneurs realize that their business is not doing well and find help, they will face disaster. Management also requires constant research for what the market needs. This does not include other managerial activities like controlling, organizing, staffing, and planning. A successful manager is a good leader that creates a good work environment and encourages productivity. The secret to avoiding startup failure is finding an entrepreneur who is prepared, well organized, innovative, and armed with determination and positive attitude. When it comes to finding success as a startup the secret is you, the business owner.
