While nobody likes to talk about it, the fact is that a great many startups fail within the first few years. Asking the question “What makes a startup fail?” is akin to asking what makes a startup succeed as there are many possible answers. But, when you’re armed with a list of all the things you shouldn’t do when launching a new business, you can turn that info into a winning plan for success.
If you’re tossing around the idea of starting a business, it’s very likely that you’re worried that things may go wrong or that you’ll make all the wrong decisions. You shouldn’t feel bad about thinking this way because most people in your shoes feel exactly the same. Right now, as you’re reading this, there are lots and lots of people just like you who are working on starting their own business ventures or who’ve recently launched their own companies. There is also an infinite number of others who have been in your situation and who’ve gone on to grow some very successful businesses – many of which you are likely familiar with and maybe even a customer of.
Whether referred to as missteps, bloopers, gaffes, slip-ups or bungles, everybody makes mistakes in life including even the most well-intended startup founders. While startups fail all the time for a variety of reasons, most often the founders make one or more of the mistakes listed below. Knowing what causes failure can better prepare you for success. After all, it’s always helpful to know what works and what doesn’t based on the experiences of people just like you who’ve “already been there, done that”.
Going it Alone
If you stop and think about it, there are very few successful startups that were founded by just one person. Even for those companies you think may have just one founder, the chances are there were more people involved from the start if you take a closer look at their history. So what’s the big deal about having just one founder? Well, for starters, it suggests that the founder could not find anyone who was interested in helping him or her. In many peoples’ book, that is a clear vote of no confidence.
Even if a single founder is to succeed, he or she is still at an disadvantage. Everyone knows that starting and running a new business is hard work and exhausting. Even if you were able to manage handling all the work yourself, there will be times and many of them when you could use some help and advice so you get things done and make the right decisions. Two heads are better than one when it comes to making tough decisions on the fly. Just knowing you have someone who’s watching your back can go far in giving you the confidence you need to make the right decisions when facing dilemmas.
There is a lot to gain by having two or more founders. When things go really wrong, it’s tough to face problems alone but when you’re backed up by others who face the same risks as you, problems are much easier to deal with. Plus, when you partner up with others, you will always be thinking about them and how you don’t want to let them down. This provides you with the motivation you need during those rough patches when nothing seems to be going right.
Thinking Too Big
Sure, every business owner dreams about reaching everyone with their products or services but that type of thinking can be a big mistake as it’s just not feasible. You can however still think big if you go niche. In other words, when you find your niche, you’ll be much more focused and effective in reaching those exact people who need what you’re selling. Let’s say for example’s sake that you have created a product that offers people a great new way to move snow effectively. You wouldn’t be marketing your product to people living in Florida or the Bahamas. Instead, you’d be more focused on one targeted group of people who live in places where it snows. This type of marketing is called niche marketing. Unlike mass marketing, niche marketing aims to address the needs and desires of a smaller market.
When your marketing efforts are focused on a smaller group of people, you will be able to better stand for who you are and clearly define your aims and future interests. Plus, you will be able to establish yourself as a leading authority in your niche. When you’re viewed as an authority, you will become a well-known name in your particular area wherein people will be drawn to your business when they’re in need of what it is you’re selling.
Not Believing in What You’re Selling
When you fervently believe in your products/services and have a passion for succeeding in your business, your prospective customers will pick up on that and be much more apt to buy from you. As a business owner, your ultimate goal should be to have customers believe and trust you wherein they’ll buy what you’re selling. If you don’t believe in the products or services you’re trying to sell, you’re going to find it very difficult to persuade your targeted customers to do business with you. But if you truly believe you are offering the best possible product or service, it will show and people will react accordingly. In other words, you’ll sell more products because people will be excited to buy what it is you’re pitching to them.
It’s important to remember that people want to buy from businesses that help them make an educated buying decision. When you clearly show that you know all about what you are selling and that you believe in it while showing some enthusiasm, your targeted audience will tend to trust your judgment much more than if you simply said “Here’s a good product that will solve your problem…buy it”.
As the business owner, it’s also your responsibility to make sure you have a team of salespeople who also believe in what they’re selling. So how do you do this? You coach them, get them fired up and prove to them that the product or service they are selling is literally the greatest thing out there.
Running Out of Cash
One of the main reasons so many startups fail is that they simply run out of cash. Even the most budget-conscious startup founder will inevitably come to a point when they run into money problems. Unfortunately, this happens to many startups early on. So how do you avoid running out of cash? By doing things like only hiring experts when they’re absolutely necessary and by not buying things you don’t need. Another way to ensure you won’t run out of cash is to over-estimate how much different aspects of your business will cost. You should do this when planning projects and campaigns and when figuring in things you’ll need in the future.
It’s also advisable to set up a method to use that allows you to easily track transactions for your business. You can do this by hand with a pen and paper, with a spreadsheet or through the use of accounting software. The point is that you should continuously track, monitor and report on your transactions and the cash in your business. This allows you to see important information regarding your bank balance and any outstanding checks or transactions there are as well as how much money is owed you & how much money you owe.