Why do most startups fail?

Starting a company is easy, but making it succeed is the hardest thing to do. Not everyone is a Steve Jobs or an Elon Musk; business acumen doesn’t come naturally to all. 

If you’re looking at starting a new business or want to turn your side-hustle into a start-up, you need to brace yourself for the tough times. Know where other companies went wrong and what you can learn from their mistakes. Here are the top 5 reasons why most startups fail. 

Reason 1: Unvalidated idea

You might have tons of ideas, but that doesn’t necessarily mean that you have to act on them. Before starting a company with your next big idea, validate it first. Do the people really need the product/service that you want to provide? Do you actually have the right solution for the problem statement? Assess the demand to see if it’s actually worth starting the company. 

Reason 2: Burnout

At the initial stages, startups have very limited resources. Whether it is time, effort or money, some startup founders put in their all and then burn out due to the frustrations. Know that you can’t have the perfect product from day one. Regulate your resources and gradually increase your expenses as your company grows. 

Reason 3: Hired too many, too soon

So many companies have also hired too many people to work for them without having enough clients or sales. This can exponentially increase the expenses, especially if they focus on hiring the best of the best. While you might want to have the best team for your startup, limit the hiring until you have a strong foundation. Start with a bare minimum team, or even better, hire independent contractors. 

Reason 4: Lack of competitive research

Some startup founders also fail to gauge the competition. Especially if the market is hot, there can be several new entrants looking to attract the same audience. While competitors can keep you focused, you can also learn a lot from what they’ve been upto. Ignoring the competitors or not analyzing the market space can be harmful in the long run. 

Reason 5: Bad pricing

Most startups begin by quoting discounted prices to attract customers. While this is a great marketing strategy, they are then unable to cover their basic costs. The cycle of underselling to gain customers can be tough to get out of, leading most companies to a loss. 

Summary

As an agency that’s worked with hundreds of startups, we’ve seen the ups and downs of a lot of new companies. The reasons listed above have occurred in way too many instances to be ignored. Being aware of these will definitely keep your ship stay afloat for longer. 

Want to be among the top 10% of startups? Reach out to us! We’ve helped hundreds of companies plan and execute their projects faster and with lower risks.