Top 10 reasons for start-ups failure

Starting a business is easy but surviving to the end is challenging. Many businesses get started with a sustainable business hope, but few of them can make a place in the market. Even most get shut down within 2-3 years of their initial levels.

A study conducted by an IBM Institute shows that 90% of Indian startups fail within the first five years of inception.

That means only 10% of startups are able to survive after all their hardship. Ever wonder, what is the reason for their failure? Why were they not making a profit? Although the reasons differ from business to business, some common reasons are high competition, lack of planning, cash burn, and inefficient workforce.

You might be thinking why you should bother to find reasons for startups' downfall, but people learn from mistakes. If you have just started your business or are about to step into the market, you should avoid mistakes that lead to downfall.

Here are some of the primary reasons for startups failure:

1.  No plan, no game:

Many startups fail to plan their business; eventually fails to; make a business. Business planning is a vital step toward sustainable business growth. It helps to forecast business stand in upcoming years.

Business planning includes market research, identifying a targeted audience, and strategic planning. Many startups jump into the market without appropriate planning, market research, and knowing the customer's demands. It is the reason they fall in the end.

2.  Flawed Price policy:

No cash, no business. Most startups fail because they; failed to generate a sufficient profit to run a business. Even if you don't earn as much money as the rent of a shop, you will eventually fail. The only reason is the price or cost of the product. Why would a customer bother to buy an expensive product; available at a cheaper cost somewhere else?

A wrong pricing strategy is a road to failure. Many startups do not identify their product market value or fix an inappropriate price. Eventually lose customers. However, that doesn't mean you should sell it at a lower rate. Analyze the market price and decide the appropriate cost of the product.

3.  Cash burn and margin disappearance:

Insufficient funds to run a business errands results in early shutdown. Every business needs time and money, especially startups. Most startups fail to cover their business expenses and shut down in the end. Even not being able to find investors is not the only reason; many startups fail to manage their cash flow and expenses due to flawed business models.

Delay in payments, low-profit margin, and inability to pay suppliers on time are some of the situations every startup faces. Money management is essential for the survival of a startup. If the income is less than the expenses, the business will sink. A well-known brand Purple Squirrel is a great example that burned its cash to stay competitive in the market and faced its downfall.

4.  Lack of demand:

One of the main reasons for startup failure is the lack of market demand. No matter how incredible a product is, without market demand, it becomes worthless. What if the market already has a similar item or is not ready for your product?

Here, market research rule the game. It is essential to analyze and identify the market demands before stepping into the crowd. Many startups fail to create market demand, resulting in their failure.

5.  Strong and well-grounded rivals:

Most startups fail to survive to the end because of sturdy and tenacious competition. It is hard to beat a firm and well-ground competitor. They chew the new business and do not let them stand in the market.

Although every business face competition, standing out in a crowd is difficult. For instance, Bite Club failed to cope with its strong competitors like Home Kitchen and ceased its operation.

6.  Incapable or mismanaged workforce:

Behind every successful business lies its efficient employees holding its back. Working with the wrong team or disharmony among team members reduces productivity and restricts business growth.

An efficient workforce must be able to solve emerging problems, meet deadlines and focus on boosting business productivity. A wrong team sometimes shows the path to downfall.

7.  Poor marketing strategies:

You have amazing products, but who knows your product? If no one knows your product, who will buy it?

Some startups are so immersed in their product that they forget that they aim to sell that product. Strategic marketing is an essential element of a successful business. Most startups fail to market their product and eventually face downfall.

Strategic Marketing planning makes the targeted audience aware of the products and their features. It helps to attract and monetize customers. However, a bad marketing strategy can lead you towards downfall. For instance, PepperTap spent high amounts on customer acquisition and failed in the end. Adopting a sustainable marketing plan can help you build a sustainable business.

8.  Ignoring customers' demand and feedback:

Customer satisfaction is the key to sustainable growth. Customers are the end-users, and their feedback matters to know the flaws and development of your product. Although startups have other important issues to deal with, such as recruitment, cash flow management, marketing, and more, customers are also an essential element of growth.

Many startups are unable to cope with customers' needs and face downfall. Identifying customer needs and market research helps in new customer acquisition and retention. It helps a business to remain profitable in the long run.

9. Lack of field expertise:

Sometimes, new passionate, stubborn people jump into the field with their amazing business ideas. A business does not run with just the idea; skills and field knowledge are essential aspects. Due to a lack of skills and qualifications to run a business, many startups fail to achieve their goals. A person should do a business, he is capable of doing.

10. Rapid expansion plan:

Adopting fast expansion plans after a few months of stepping into the market sometimes fails. You got a big deal, congratulation. But do you have enough resources to fulfill your order? Are you planning to expand your business in a different city while your current business is not generating enough profit?

Do not rush to stretch your business operations without proper planning and sufficient cash backup.

For instance, Monkey Box failed because of its speedy expansion plan. They were going well until they spread their kitchens across cities and hired workers more than needed. In last, things went out of control and burned their cash into ashes.

Wrapping up:

Whether you are starting a small business or a large industry, you should avoid mistakes that lead to failure. Repeating the same mistake that many failed startups did is an idiotic move. You have the chance to take a road that leads to success, not failure; grab it. Try avoiding any possible way that leads to a road of downfall.