4 Reasons Why Startups Fail And What To Do About It


Here are 4 reasons why startups fail. Source: Photo by Kev Seto on Unsplash

A report by CB insight states that 70% of tech companies fail, while 97% of consumer hardware startups fail or become zombies. While unicorns and IPOs have everyone talking about the successful startups, it’s vital to understand why so many startups fail so you can avoid the same pitfalls. Here are the most common reasons and how you can prevent them.

1. Not balancing between work and fun

When growing up, you might have heard that all work without play makes Jack a dull boy, but this cliché statement is close to business failure than most people think. Research indicates 8% of businesses fail because of burnouts and the inability to cut losses and channel energy where it will be most profitable. Building a business will require you to put in more work, but it doesn’t have to reach hazardous points. Prepare yourself mentally on how hard and awful it is to start a company, then make it deliberate to travel, workout, and have other relaxation methods.

2. Running out of cash

A key component of running a business is ensuring you have enough money to run and enough left to carry the company until you break even. Just because you raised a considerable amount last year does not mean you stop looking for funds. Premature scaling, for instance, is responsible for 90% of startup failure. When scaling, you seem like you are growing because you are hiring, and you are funded, but you might be biting more than you can chew. Money Monarch adds that you should not mix your personal finances with business finances. You can even have extra sources of income to keep your home steady as you work on your business. Money mistakes are common in business, but you need to ensure your life will not be affected if something goes wrong.

3. Not enough market for your product

Most startups believe that their product is so great that customers will come running begging for it. Obviously, the money will flow automatically from there. This, however, is naïve, and a reason why 45% of startups fail. Instead, you should understand what your product will achieve in the market and remain flexible to change to the market needs. Beta-testing the product before you launch will significantly reduce your failure and market rejection.

4. Losing focus

Personal issues, distracting projects, and general loss of focus contribute to 13% of why startups fail. At some point, you and your team may start to wonder where you are heading, and whether you want to be involved in a startup and the responsibilities that come with it. Be ready to deal with this and have strategies to help pull you out of the dark hole before you call it quits.

You need to know your product better than anyone else, understand your customer, and have a burning desire to succeed no matter how challenging things become. Businesses are not successful in a day, but by avoiding these and other mistakes, you are on your way to making your dream business a reality.

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