Every business is unique and the businesses which failed to leave a successful mark have been unique too. If we look at the failed businesses, it is sure they will have some commonalities but it is not possible to stick to one of them to decide their failure. The success of the business is related to some of the intangible factors timing, temperament of founders and clarity of vision.
It is said that only 50% of the businesses out there get on to its fifth year. If you are into tech business, then it can prove to be beneficial for you compared to other streams of businesses. You will be able to know the factors what failed businesses as they keep on publishing details related to their failures. So all you have to do is to go to Google and look for the failed startup and you are there with their story.
It is always good that you learn from the mistakes of others. For businesses, it decreases the learning curve and helps them to avoid the future mistakes they are about to make. To help out such businesses, some of the top reasons for the failures of the businesses have been mentioned below. Effective startup business strategy which can help them overcome the problems have been explained too.
So if you are set to avoid those mistakes, just follow:
Products were bad Market Fit
Every business needs to work towards fulfilling the market needs by delivering their products. They need to know what the market wants.
Many business owners simply avoid this simple thing and they find it hard to thrive in the market. As per the CBI insights report, it was said that bad market fit was the main reason behind the failure of 42% businesses.
Every business should ask one question to themselves – Are we solving any problems? This is one of the reasons why companies come up with MVPs and test them before getting products into market.
Still, there remain many businesses which enter the market with products or services which are of no value to the customers.
Some of the reasons why such startups came up with products that were not market fit are:
- They loved their product dearly and didn’t care about the market data
- They were not clear about the share of the market they needed
- They didn’t manage to find enough people to come to them to understand their idea
- The value proposition was not calculated properly by them.
- They have future products which are fit for the present market.
To know and estimate the market fit is not always easy for startups. The best way they can find the solution is by keeping on testing. So once the product has been proved good for the market, make a few tests again.
Poor Business Model
Unfortunate shortsightedness or poor business structure can often result in the failure of the business. It is not possible for the business owner to know what they are up to without knowing cost per acquisition or the customer lifetime value.
Even after having basic idea about business success, it is possible that the startup can make huge strategic error. If we take the example of Tutorspree you will know the same.
About their failure they have stated, “Although we achieved a lot with Tutorspree, we failed to create a scalable business…Tutorspree didn’t scale because we were single channel dependent and that channel shifted on us radically and suddenly… In March 2013, Google cut the ground from under us and reduced our traffic by 80% overnight. Though we could not be 100 percent certain, the timing strongly indicated that we had been caught in the latest Panda algorithm update.”
They tried to find and make other channels for customer acquisition strong but that was not enough of the effort and the business failed. It clearly shows that you should not settle for what is working and should challenge it every time. You should find more ways to stay diversified. Always opt for startup company business strategy which can have positive effect on the business.
Not Ready to get Feedback on Prototypes
Many startup owners have the habit to keep their product secret until it is developed completely and perfectly. They are often afraid of the idea getting stolen. They want to be sure they are the first to get it on the market and impress others. They also have the fear that revealing the prototype can let the people think the product is not up to the market and bring down the sales. Not getting feedback from the potential customers can prove to be negative for the business.
So try to come up with a cheaper prototype of the product and try to get feedback from the maximum number of people you can reach to. Based on the feedback you can build the product and keep on getting the feedback again. Repeat the process till you manage to make all the necessary changes. In short, going for low cost business solutions for startups work.
Getting Out-Hustled
Being a startup business you will be more implied to market first. If you feel that you have given a thought about what the market really needs then chances are there that other have thought about it too. Competition may seem to be tough but in real sense it is good as it will ensure that the products that arrive in the market are of good quality.
To stick to the competition or not getting obsessed with it is very important. The right use of competition in the market will help you improve your efficiency and get smarter, faster and work harder. Remember that after some time no one is going to look for the father of the idea rather, everybody will be concentrated to know who did the best. So just make it a point that you find software development company for startups that are capable to offer you the best solution.
Bad Pricing
Many startups make the mistake to think that the price is what drives in sales. Many a time, this is not the case. The right sale for your business comes from the effort of sales and marketing team who work towards propagating the value of your product or services to the people. This means it is very important for a business to find the right people for those job roles.
When said that it is very important for you to set the pricing. If you set a very low price then you will not be able to do business due to bad margins. On the other hand, if the price is very high, then you have the high risk of not finding the customers enough for sales.
Some of the factors that have to be checked are:
- Your target revenue: What amount of money do you expect to make from your business?
- Your costs: Your estimates should include costs of packaging, shipping, rent and marketing.
- Your competition: What are your competitors charging for the products? How much more you can charge and justify?
- Your customer: What amount your customer will be able to pay?
Throughout the lifetime of the business, the pricing activity should be regularly re-evaluated. Based on the market values for your product, you should keep on pricing low or high accordingly. You should acquire detailed information on pricing before getting on the market.
Getting Distracted
Everything is funny about distraction. For startups they never realize they are undergoing one when they are actually experiencing it. They only come to know about it once it has consumed them. This happens so quickly and easily as startups feel each and every activity to be important in the beginning.
Product development, networking, payroll, legal –for a startup, these are all much to handle. This fact itself makes it a point that one person should not be doing everything. Sadly for startups, they have limited budget and fewer resources which force them to take up all the activities and they are left with no other option.
So startup should focus on the main agenda- that is to make sales. Driving sales has to be the first thing to do once you have an MVP. When you are focusing on such an important act, you will need to implement co-working. At this point you will need people who can take care of bringing the coffee on the table, pay the utilities, manage the place and work on photocopy machines. While they help you manage the things, you can focus on acquiring more customers and build business. Once you start to grow and make enough money, it is more about delegating work and systematizing processes.
Poor Hiring Decisions
When you are limited to a small team, each member plays a crucial role towards the business. In order to have meet technology with your business goals, you will need to have a CTO and along with that you will need to hire other important people who can influence your business. Poor hiring decision can mean not finding the right people to hire for the job or failing to fill up the positions which are much needed for the business.
When it comes to startup, it really needs the kind of right people to work there. It needs people who are enthusiastic, ready to take up the responsibility, work in variety and work on their own. This means it is important to find leaders who can work in groups. Keeping these things in mind, it is seriously hard for startups to find the right people they are looking for.
check this also Top 5 Highest Paying Jobs In India
Some of the tips which startups can follow to hire people for the job are
- Personal projects
- Previous experience of working with startups
- Social media presence
- Previous experience of working with small business
- Creativity in applications
- Foreign experience
- Founder aspirations
So the question is where will you find such candidates? The answer is that instead of just focusing on traditional advertising and job boards, you should look for community which work towards startups. You will be able to easily find developers, marketers, project managers and designers there. If you try to improve your community reach you will be able to easily get information on potential leads.
Issues with the Team
At the end it is all people who are working together. People are more driven by emotions and so when it comes to business, emotional behaviour among the team members can lead to conflicts among the team members. So instead of working together people will move in different directions and it can completely destroy the value and culture of the company. For any startup, this has to be the last thing happening to it.
It is important for the startup founder to ensure that there is no friction between the teams and in case something comes up, it has to be resolved instantly. In case of founder conflicts, there should be shareholder agreement in place which can be used when needed to clear off issues.
Inability to Raise Capital
If you have been ever into startup business then you will know the difficulty you will face when it comes to finding the capital for the business before you succeed in it. Many startup owners only put up the efforts late while waiting for the cash to burn out. They waste their time behind wrong investors and fail to offer the necessary information which explains the need to get investment. Starting the efforts earlier by months can help the startup to survive well.
AUTHOR BIO