These Are The Major Reasons 90% Of Start Ups Fail Within Three Years
There is no greater feeling for a business-minded person than to establish their own startup. When the bank finally approves that loan or you finally have enough money, figuring out what you want your start-up to be in the only thing left to do.
Establishing and maintaining a start-up company is no easy task and the reason for each one’s failure may vary. Here are a couple of reasons 90% of start-ups fail and only ever make it to 4 years:
1. Little or No Market
Starting a company has never been an easy task. It has always required a substantial amount of seed money. One must be mindful of the market they are targeting and ask themselves if the product they bring to the table will even sell.
Why your product mail fail:
- No one really needs what you’re selling
- You lack much in the way of ‘supporting tools’ that would otherwise draw customers in
- The product is out at the wrong time; perhaps products currently on the market are too similar to yours
- You know your target audience, but your current funds will can’t pay for the scope of advertising required
2. Business Model Failure
Before you ever think about getting into starting and owning a business, it is of vital importance that you draw up a business model first. There’s certainly nothing wrong with developing your product first, but be mindful of putting too much focus while trying to start up.
A business model’s failure may also result from an entrepreneur’s lack of knowledge in business. If you want to find a solution to this problem, here are a few things to consider:
- Can end users be acquired while staying within advertising costs?
- Is the customer’s lifetime loyalty worth the cost it took to acquire them?
3. Management Team’s Efficiency
If you plan on owning a company but also being absent from its day to day operations, you’ll be needing to gather a management team together. The problem with doing so is being unsure of your pick’s team management style. Here are some of those reasons a start-up might fail:
- Failure to keep long-term goals in mind ruins the ability to strategize
- Their research is sub-par or their methods for market capture are not well-timed
- Build up and launch of a product also suffer
- A general lack of communication among the team’s members or inability to communicate
How to Solve the Problem?
- Always make decisions based on your business data and not by emotion
- Everyone is held responsible for their part in the team’s efforts
- Better to meet and speak too many times than not enough
Is your management team unable to reconcile, even with those kinds of solutions? Do not be afraid to make a change to ensure the survival of your business.
4. Cash Becomes a Constraint
Remember the mention of a loan being what helps you start a business? It is good seed money to begin a business, but one other important aspect of establishing a start-up is ensuring the business has a positive cash flow.
You cannot start a business with only the seed money. If it’s a struggle to generate the funds yourself, look into having private investors to provide the cash. But if you got the private investor route, they WILL be looking for a positive Return on Investment.
- Always keep and back-up thorough financial records
- Look at different methods for generating funds to keep it ‘in business’
- Network in the business world, build relationships with investors
5. Product Doesn’t Fit Market Needs
So you plan on bringing a product to market and you think you’ve got the very one the market needs. What if the product you’ve built isn’t what the potential consumers are looking for? Or could it have simply been a poor marketing strategy?
Whatever you think it is, everything around the product may require some changing.
What Should You Do?
- When you market your product, keep it in line with the vision and how its produced
- Make the marketing team part of the product’s development
- Let the production team know what investors and consumers may be thinking
These are only a few of the reasons a start-up may fail in its first few years. If you already thinking about these things, you can take the required steps in ensuring not only that your business does well, but does well for a very long time.