Top 7 Reasons Why Most Startups Fail (Causes & Solutions)

A startup is teamwork with lots of efforts of each and every team member in establishing any business. Some startups succeed, some not. Fact says that nine out of ten startups fail and their failure teaches us the best lessons.

What are the main reasons behind their failures? Founders blame investors, investors blame others and marketing people blame it all on the recession. A great team is not just a group of smart people, they should complement each other’s strengths and mitigate each other’s weaknesses. Great entrepreneurs should identify their faults, learn from their mistakes and take steps to minimize risk early.

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As a founder, you must attract and retain the right people to build the technology that understand your industry and scale your company. There are things that you must possess to be a successful entrepreneur, but they won’t guarantee success. You would at least improve your chances of success. So, we are going to discuss some comparison of the reasons for failure and the factors for success. You can also take advice from experts of the QuickBooks Online Support team.

Main Causes Why Most Startups Fail

1. Poor allocation of resources and money.

Startups sometimes fail due to not having a proper plan about how many people they need to hire, when is the right time, and which teams should be invested in at the first stage. The founders don’t want to give up a piece of the pie when start-ups run out of resources. It happens generally due to the budgets were not planned properly, the burn rate was too high, or it just took longer to raise the first round than initially expected.

2. Not realizing the competition in the market.

We often get distracted instead of focusing on own things due to the competition. Ignoring the competition is a recipe for disaster of startup failures. You need to develop products according to market needs. It is not possible to create a viable product in high demand without measuring, trusting the numbers, tracking, validating, and optimizing the data you get from your clients.

3. Arrogance and Hubris

It is good to be always overconfident for any successful entrepreneurs. Without overconfidence, nobody would have the courage to start their own business. But, sometimes it turns into arrogance. Due to weak marketing or poorly-planned sales efforts, many excellent products that have failed in history. Hubris and arrogance cause startups to fail through poor marketing, product mistimed, need or lack of business model and not Using Network/Advisors.

To fix it: You need to temper your overconfidence with the humility to accept criticism from others without becoming defensive.

4. Egotism

Startups require talented and energized employees having special knowledge, creative skills and experience. However, building a business is always a team effort. Egotism causes failure of startup through disharmony on Team members or investors.

To fix it: You should read the newly-published book which contains team-building rules based upon actual scientific research or survey on Startup.

5. Imbalance

The lack of work/life balance creates stress and leads to bad decisions and yet many startups try to operate in round-the-clock crunch mode. This imbalance causes startups to fail through a lack of focus and passion.

To fix it, do follow some simple things:

  • Exercise or meditate every day,
  • Turn your phone off when you go to bed.
  • Eat proper diet timely, etc.

6. Inflexibility

It is the most important advantage over an established firm of any startup. But, there’s a natural human nature to continue to pursue a course of action after it has been proven unworkable. Inflexibility causes startups to fail through failure to pivot.

7. Running out of cash

A real reason that new startup fails is that they came up short on money. A key occupation of the CEO is to see how a lot of money is left and whether that will convey the organization to an achievement that can prompt successful financing, or to cash flow positive.

Achievement for raising cash

The valuations of a startup don’t change in a linear fashion over time. Basically,  it was a year since you raised your Series A round, does not mean that you are currently worth more cash. To achieve an expansion in valuation, an organization must accomplish certain key achievements. For a software company, these might look something like the following these rules:

  • Progress from Seed round valuation: The goal is to remove some real components of risk. That could be contracting a key colleague, demonstrating that some specialized hindrance can be survived, or constructing a model and getting some client response
  • Product in Beta test, and have client approval. Note that if the item is done, however, there isn’t yet any client approval, valuation won’t probably build much. The client approval part is unquestionably progressively imperative.
  • The product is delivered, and some early clients have paid for it, and are utilizing it underway, and detailing positive criticism.

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Increasing Sales and Reduce Costs

This is where more business owners start when they try to improve their cash flow. If you look close enough, there are always places you can cut fat and this can uncover significant areas for improving cash now.

If you’re an e-commerce merchant, you may be happy with your software platform, but it may be costing you more than it needs to. The problem with legacy software is that companies get used to using the same platform for many years with the same recurring costs to operate and maintain the system that they don’t know there are cheaper and more streamlined options out there. What they may not also realize is that their platform may be limiting their rate of growth.

Take Big Commerce Enterprise vs Shopify Plus for example. If you’ve been on Big Commerce Enterprise for a while, you may not know that e-commerce merchants on that platform are lagging in growth compared to other platforms like Shopify. It may also be easier and cheaper to scale up.

By making a shift in a critical system, it could boost growth and reduce costs.

Hope you will consider these reasons and solution for your startup. If you have any query, you can ask to accounting wizard of WizXpert. They will guide you and resolve your all issues.

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Author: Editorial Team
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