Why 90% Of Startups Fail And How You Can Beat The Odds

According to international statistics, about 20% of startups fail within their first year of operations.

While 1 out of 2 companies which is a whopping 50%, fail within the first five years of inception. Scary facts I must say, but facts remain facts nonetheless

Several researches have been conducted in that regard, yet the problem persists. CB Insights highlights the lack of proper market targeting for the product or service, insufficiency of funds, not having the right team, failure to weather competition favorably, price and cost issues, wrong business model, and bad marketing strategies as causes for this condition faced by the majority of startups. 

The odds are clearly stacked up against all startup companies. Starting with fierce market competition from established businesses in the industry, developing product-markt fit, government regulations, to a desperate lack of money. 

These and many more hurdles are faced by young businesses, especially technology startups. It will take real determination and diligence to start and keep a business afloat, especially in times of global economic meltdown. 

Note that, if you want to start a business because you wish to avoid corporate struggle alone, then take my advice and don’t do it. The chances of surviving the market with passion alone are very slim. You need a little more than a never-give-up attitude to climb up to the 10% of any industry.

Why 90% of startups fail

Read on to discover why 90% of startups fail and how yours can be among the successful minority.

1. Not meeting a market need

This is when a startup company creates solutions to problems that do not satisfy a specific need in the market. It is no use creating a product nobody is interested in. Not meeting a specific market need is the cause of 42% of startup failures.

No matter how attractive an idea may be, if there are no users it will only be a lost cause at most. The result is that the company will begin to record huge losses right from the start as a result of heavy marketing costs to get the product into the hands of skeptical users. There will also be a wide waste margin. In the end, such companies are forced to go under or keep operating at a loss.

2. Lack of cash

Finance is the second topmost reason why many startups fail. It has been said that finance is the lifeblood of a company, therefore, any business without available cash is as good as dead.

To run your business successfully you need a steady supply of funding and that’s where startup investors come in. Startup investors are individuals, businesses, or even corporations that take the risk of financing early-stage startups with high growth potential in exchange for a small percentage of equity.

3. Having the wrong team

This is another solid reason why most startups struggle and fail before maturity. Having the wrong team for any company is tantamount to failure before the firm even begins operations.

An ideal team comprises of people who, though differently skilled, have the same vision of the company in mind. They share the same values, goals, innovative abilities, and dreams about the company they envision.

4. Bad marketing strategies

Purposeful marketing positions a brand right in the face of its potential market repeatedly. When you apply the perfect marketing strategies your customers will see why they need to buy your product, the fear of missing out on such great benefits, and subscribe to your product or service at good timing too. 

5. Wrong business modeling

Some unsuccessful startups may not have created a bad product but failed because they couldn’t pick the right business model for their company.

A business model simply put, is how a business intends to make money from its product or service. A good business model clearly states the average price per unit of a service or product, how exactly you intend to get paid whether by periodic subscriptions, payment based on consumption, and other pricing details.

6. Not taking customer feedback seriously

Customer review and feedback are determinant factors in shaping your product if you really want to satisfy your target market. However, when ignored it can be very damaging to the public image of a business.

Countless startups have failed due to poor customer relations and complaint management. Just as it is equally very bad to let your customer’s mail stay unattended for weeks, months sometimes. You are losing much money without even knowing it.

7. Insufficient market research

Why some startups fail is due to a lack of proper market research before deciding on which markets and products to work with.

There are a ton of marketing information out there but it’s certainly not a one-size-fits-all affair. All businesses still require intense research to get straight on things like total market share, income bracket of customers, and other user-specific data. 

8. Too many things happening at the same Time

As a startup, your focus should be on building the right product for your target market, at least within the first five years of operation. 

One reason why new companies burn out before reaching maturity is because they’re trying to engage in too many things at the same time. Things like expanding into new subsidiaries, creating more product and service lines different from the main product, will only distract a startup from focusing on their primary product. 

For example GoldenGlives, an online farm produce retail store decided to incorporate petroleum exports into their business model without first building a local audience/product base for their prime service. The company will be forced to share its limited resources between the two business models instead of focusing on one at a time.

These and many other reasons amount to why 90% of startups meet with so much failure, especially when starting out for the first time. Numerous early-stage founders have come to this conclusion when it was too late to build their dream companies.

How to beat the odds with your startup

Here’s how you can make your startup an exception and beat the odds:

1. Focus on the long-term goal and making social impact

Your business should be solving a bigger problem than just making profits. The money is good but an even greater goal of contributing to humanity should be at the core of your operation.

To create a sustainable business, you need to be concerned with such things as giving back, pursuing the SDGs, and building strong product ecosystems. However, this does not mean you should neglect the financial aspect of your business, just don’t make money the sole reason why you open your corporate doors each day.

2. Keep testing your minimum viable product(MVP) until you achieve product-market fit

Ensure to validate your product over and over to ensure there is consistency in quality. In order to stay on track, you should concentrate on building the right product for the right market. 

Furthermore, your product and services should be flexible in response to market preference. If yours is a SAAS model, then try to maintain a user-focused platform that is easy to use as well as customizable. By and large, you need to conduct an intensive market study to discover what works for you and your target market before launching out. That said, invest in strategic marketing as well. Show your ideal customer the unique benefits and features of your products and services.

3. Build a business continuity model

Build a business that has a continuity model, that is a business that is scalable over time. Since business growth is in stages, plan ahead of each growth phase and prepare possible alternatives.

4. Manage your financials carefully

It is not every business owner that is overly enthusiastic about financial statements and the like. Nevertheless, as a startup looking to grow, the finance aspect of your business should not be ignored. 

Endeavor to pay vast attention to how much you earn in revenues and expenses periodically. Invest in a business manager or competent accounting firm to keep your books and control inflows and outflows, and provide investment advice for the long term.