We tend to look for the magic formula to succeed startup. In this article, we are interested in the reasons why a startup fails.
Anyone who is interested in entrepreneurship tends to look for the magic formula for a successful startup.
The thing is, success isn't just about taking the steps to get there. You also need to know what not to do. In this article, we are interested in the reasons that make a startup fail.
The failure of a startup as diverse as it is varied does not always come from competitors. To better understand this article, we recommend How to Build a Successful Startup, The Ultimate Guide in 4 Lessons.
The current guide is taken from an infographic produced by the site technorian.com. This infographic highlights all 56 reasons startups fail.
These reasons are divided into several categories for ease of readability. Without further ado, let's start with the idea.
Why do startups fail? - 9 causes that come up often
1 / The idea
The failure of a startup can come even before its creation, that is to say in the design. Several aspects of a startup idea can destroy it or limit its progress. Here are the various reasons why a startup idea can make it fail:
- Start a startup for the wrong reasons
- An idea that does not serve the needs of the market
- Not being able to compete
- an idea that derives from an existing product
- People love full products. Not just an idea.
- Failure to protect the idea through intellectual property.
What do the experts say about the idea for a product or a startup?
”To transform a very interesting idea and make it evolve into a company that can innovate for years, it takes a lot of disciplines" Steve Jobs, CEO, Apple Inc.
" The value of an idea lies in its use "- thomas edison, Co-founder of General Electric.
" The best startup ideas tend to have 3 things in common: they are ideas that the founders want on their own, that they can build themselves, and that very few people realize that they are worth making. Microsoft , Apple, Yahoo, Google et Facebook all started this way ”- Paul Graham, co-founder of Y combinator and Via web.
2 - Planning
If you have a proven idea, the lack of a plan could put the life of a startup in danger. You can be in big trouble if a startup fails in these areas of planning:
- No business plan
- No plan B or C
- Inability to rotate when necessary
- The entrepreneurial vacuum
- the desire to evolve too soon
What do the experts say?
”Plans are only good intentions until they immediately degenerate into hard work” – Peter Drucker: Renowned businessman, management specialist and writer.
"Planning brings the future into the present so you can do a few things about it now" – Alain Lakein: Author of “how to get central of your time and your life”
”Reduce your plan to writing. The moment you finish it, you will definitely give concrete form to an intangible desire ” - Napoleon Hill
3 - Leadership
Leadership is one of the important aspects in running a startup. Here are the causes of a startup's downfall if leadership is lacking in the following aspects:
- Not having mentors
- no harmony between investors and co-founders
- reluctance to get their hands dirty
- Think more than act
- not enough effort
- short vision
- choose the wrong person as a partner
- lack of interested investors or funding
- Following bad advice
- Lack of passion as well as domain expertise
- lack of attention
What do the experts say?
"Leadership is doing the right thing when no one is watching" - George Van Valkenburg
"Leadership is the art of getting another person to do what you want because he wants to do it" - Dwight Eisenhower - 34th President of the USA
4-Finances (Financial management)
Financial problems that can sabotage the success of any startup include several reasons related to managing company finances. It's about :
- lack of money: which is often mentioned even if it is not always the case.
- Negligence in keeping track of numbers.
- Obsession in fundraising
- Bad investment
What Are the Experts Saying About Financial Management?
- ”Watch out for small expenses. A small leak can sink a big boat ” - Benjamin Franklin, one of the founders of the United States of America and inventor.
- " Rule # 1: Never waste money. Rule # 2: Never Forget Rule # 1"- Warren Buffet : Investor and CEO of one of the largest companies in the world
- "Never let a poor man advise you on your investment" - Spanish proverb
- " I think there is a very fine dividing line between success and failure. And I think if you start a business without financial backing, it is very likely that you are going to the wrong end of the line.
- separation"- Richard Branson, founder of the Virgin Group which includes more than 400 companies.
5- Human resource management in a company
If your startup is not able to meet these prerequisites for good human resources management, those days will be numbered. The causes of startup failure in terms of human resources are:
- The ignorance that customers are not always king. The employees are!
- Don't hire the winners (bad manager).
- Bad team for your business
What the experts say about human resources management
- ”The best way to be productive is having a good team. So I spend more time than most CEOs in human resources. it's 20% of the week ” - Kevin P.Ryan , Founder of several companies including Business Insider.
- " Human resources are like natural resources; they are often buried very deeply. You must go to their research; they are not just located on the surface. "- Ken Robinson : English author.
- ”… While extraordinary products and unique services can afford competitive advantages, the only advantage that stands the test of time is… people. “ - Mark Salsbury, Senior Vice President of Human Capital for Dover Product Identification.
6- Product launch
We come to the last part of this article regarding reasons why startups fail. If you don't take care of these sections about product launching, you may have a hard time making your business successful:
- Timing: A point in time is worth a hundred.
- The location of your business should unite with its concept
What the experts say about product launches
- " … The time between having an idea and its public launch is measured in days, not months, weeks and not years"- Tim bray , Entrepreneur and application developer Canadian, co-author of the XML specification.
- " To start you have to stop talking and start doing"- Walt Disney , Creator of Disneyland.
- " A lot of startups fail because they create products that no one wants ..." Sue Anne Dunlevie, founder of Successful Blogging.
Marketing is one of the most important areas to master to win the market. It is also an area that requires a lot of strategies in order to position yourself for customers. If you are a startup or a company, you should avoid:
- bad marketing
- attack an already conquered market
What the experts say about marketing
- " Marketing isn't about the things you created anymore, it's about storytelling”- Seth Godin, author, entrepreneur
- ”Good marketing makes you feel intelligent a company. Great marketing makes the customer feel smart ”. Joe Chernov, vice president of marketing at InsightSquared.
- ”A good marketer sees consumers as human beings complete with all the dimensions that real people can have. “. Jonah Sachs, author designer and entrepreneur.
8- The Sale
Selling is the start of accomplishing a business goal. Without it, the startup or company slowly dies. Unsurprisingly, the failure of a business comes from the following points:
- Lack of sales
- Problem of cost estimate.
Expert advice for selling
- ”You don't close a sale; you open a relationship if you want to build a long-term successful business. ” - Patricia Fripp, author, speech coach and sales presentation.
- “The person who will use his abilities and his constructive imagination to see how much he can give per dollar, instead of the minimum he can give per dollar, is linked to success”. - Henry Ford, founder of Ford Motor Company.
- ”In the modern business world, it is useless to be creative or original thinker unless you can sell what you create ”. - David Ogilvy, Advertising pioneer and founder of Ogilvy Group.
9 - Operations management
Operations management is very important in the long-term growth of a startup. There are many reasons why businesses fail in this area:
- We focus more on (supposed) profits rather than users.
- ignorance of customer reviews.
- legal challenges
- poor execution
- the pivot that goes wrong
- poor resource allocation
- no website
- business model failure
- bad product
What the experts say about operations management
- “Good management is showing average people how to do the jobs of senior people”. - John D. Rockefeller: Co-founder of Standard Oil Company.
- “Good management is the art of making problems so interesting and their solutions so constructive that everyone wants to work on them and solve them”. – Paul Hawken, Environmentalist and entrepreneur.
- “A company can seize extraordinary opportunities only if it is very good at ordinary operations”. Marcel Telles: Brazilian businessman, multimillionaire.