Why do Startups Fail?

The top five reasons startups fail – avoid the traps!
If you’ve got a great idea for a business,  the resources to form a limited company and the support of your friends and family to help you, it may seem like nothing can stop you. However, every year thousands of businesses fail for a variety of reasons, and the majority are startups that launched in the last couple of years. This isn’t meant to dissuade you from putting your plans into action, but encourage you to study the most common reasons new businesses fail, as detailed below:

1.       Poor business plan. There’s a reason a solid business plan is required by most investors worth their salt: they need to know that you’ve thought about how to take your businesses forward and how you’ll deal with the unexpected. Your plan needs to be realistic and practical: if it’s full of hot air, chances are so is your business.

2.       Lack of market research. Ideas alone aren’t enough: you need to be certain that people want what you’re selling, and that they’ll continue to want it in the future. Proper market research will reveal if there’s a need for your product, how crowded the marketplace is and what your target customer is like.

3.       Growing too quickly. Early success is great, but it can lead to overconfidence that quickly sinks a business. Trying to expand before your business is ready can lead to non-delivery, which leads to disappointed customers and a damaged reputation. Always make sure the underlying systems that deliver growth can support any growing that you do.

4.       Cash flow problems. As a start-up, the last thing you want is to be in debt: suppliers and financiers will run a mile, and you’ll find it very difficult to rebuild your credibility. Pay in cash as much as possible in the early days, as accepting too much early credit based on enthusiastic projections puts your business at risk.

5.       Giving up too easily. Startup owners take a big risk, but you have to believe in your idea enough to keep going through the bad times as well as the good. This is a common reason ‘one man band’ businesses fail, so consider at the outset whether having a partner would help keep you going. Not every disaster is the death knell for your company: keep fighting, be persistent and make sure all that effort you put in wasn’t for nothing.