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Top 5 Reasons Why Startups Fail

Since this year has begun, we all have been hearing only success stories of Indian startups. Spellbound by the number of Indian startup unicorns, we tend to ignore the startups that promised and projected industry disruption but had failed to leave a mark and shut down.

Had the scenario really been this good, there wouldn’t have been this statistic showing how difficult it is to keep a startup successful.

“For every 100 startups, only 10 are worth investing, and only 1 of them is expected to succeed.” 

Well, what is then the reason that only as much as 0.01% of startups make it big? Let’s look at some of the major causes why startups fail.

Reasons Why Startups Fail

This infographic by 100 First Hits shows the major causes of startup failure. The top five reasons have been explained in detail below:

1. Building Something Nobody Wants

The majority of the startups fail because they create products that nobody wants or has no real-life benefit.

Do customers understand how your product fits their requirements? Is it making their life easier, saving time, or improving their mood? What is the purpose of your product? 

If your product isn’t solving any of the above issues, it has no real value. Every big brand that exists right now understands this. As an entrepreneur, your focus should either be on solving a problem or improving an existing solution.

Know from the start who your target customer is, in detail knowledge about their interests, lifestyle preferences, hobbies, values, behaviours, etc.  Startups that fail to understand this point usually fail in the first five years of their operations.

2. Poor Hiring

The health and profitability of a startup are majorly dependent on the quality of its workforce. Even before the firm takes off, a leader without appropriate experience in developing a cohesive team might harm the brand.

Not only hiring a poor candidate will cost the company time and money, but the compounding cost of hiring, firing, and rehiring will create a toll on the company’s productivity and reputation.

As per a report, 60% of bad hires will negatively affect the performance of other team members. Also, 39% of businesses report a productivity decrease as a result of a bad hire.

So, to keep your startup on the path of growth, pay utmost attention to the hiring process. Choose a candidate that is qualified for the job and a great fit for your office culture and environment.

3. Lack Of Focus

Many zealous entrepreneurs battles to include more features in their new products and services, hoping that adding more features will make the solution more appealing to a wider range of clients. In truth, adding more features will make the product more complex and less accessible for everyone. Focus is the art of narrowing your focus to the most important function for the majority of clients.

Because startup founders rarely achieve work-life balance, the risk of burning out is considerable. 5 percent of the time, burnout was cited as a factor for failure. 

4. Failure To Execute Sales and Marketing

For many entrepreneurs, sales and marketing is a mystery. That’s why the majority of the founders only focus on building the product. They pay no attention and neglect the sales and marketing aspects of the business.

When compelled to consider sales, founders frequently seek investors or advisors who can introduce them to clients or assist them in hiring a top salesperson. Founders have high hopes for these mystery well-connected salespeople who will arrive, do their persuasive art, and solve the sales problem.

So, as a founder, you must create a well-versed sales team. Good products backed by a good sales and marketing team will ensure the sustainability of your startups

5. Non-compatible Co-Founders

Running a startup alone is not easy but operating it with a non-compatible co-founder is a sure-short route to disaster.

Having non-compatible co-founder results in unresolved disputes that compounds over time, wreaking havoc on co-founder relationships and creating difficult breakups., also resulting in business failure.

So, a compatible co-founder is necessary to grow a business. But choosing the right co-founder is as hard as choosing the right person to marry. Choose the one as a co-founder who shares the same vision as you, who is emotionally buoyant, and has different operational skills than you and a complementary temperament.

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