Why Startups Fail

success Jul 20, 2023

Starting a business is a lot harder than most people think. Rarely is a business so in tune with its customer’s needs that it can float along with minimal effort. But why do so many businesses fail? The reasons run deep, but here is what you should know before starting your own business. 


  • According to business owners, reasons for failure include money running out, being in the wrong market, a lack of research, bad service providers, ineffective marketing, and no proven process.
  • Ways to avoid failing include setting goals, accurate research, loving the work, not quitting, and aligning yourself with the right team. 

Reasons for Failing

If you poll former business owners, you will get a wide variety of reasons as to why their businesses failed. 

  1. Money Ran Out: This widely given reason doesn’t really explain why a business failed. The money ran out because it stopped coming in, so why did the cash flow dry up? Was it due to poorly managed expenses or because of lack of sales? Money running out also relates to an inability to obtain financing needed to sustain a business until it can start generating profits.
  2. Wrong Market: Too many people try to start a business targeting everyone as their demographic. This doesn’t work out well because its too broad. The more narrowly defined your niche is, the easier it will be to market to the right audience. 
  3. Lack of Research: You have to know what your customers want. Too many would be entrepreneurs go into the market thinking they have a great product or app to offer, but they fail to realize that "customer is king". It doesn't matter what you want, all that matters is what your customer wants. By doing your homework and surveying potential customers, you will know exactly how to meet your customers’ needs.
  4. Bad Service Providers: Often, when starting a business, tasks are outsourced and service providers are hired. Ultimately, the service is poor because there is no incentive for the service provider. By having a partner with a vested interest, you can have someone in your corner that genuinely cares about your success. 
  5. Bad Marketing: It could be said that a business boils down to execution and marketing. If you excel at both, it doesn’t matter what you are selling because someone will buy it. Instead of fumbling through your marketing campaign, hire out that aspect of your business. It costs money, but if done right, it will bring in much more than what you spent. 
  6. No Proven Process: Too many people start a business and wing it. They have a vague idea of what they are doing, and as a result, they experience a lot of trial and error. Without a proven process and experience, you are destined to struggle. 

How to Avoid Failing

Below are key points to increase your chances of success. 

  1. Set Goals: Know exactly who you are, where you're going, and how you're going to get there. Without a written plan, you’re just wandering aimlessly. 
  2. Research: Know everything about your market and customer. Know the size of the market and the market share you can reasonably expect to capture. Know everything you can about your customer - their incomes, their desires, and what makes them tick. The more you know, the easier it is to market to them.
  3. Passion: If you don’t love what you do, you will give up when things get tough. You must be passionate about your business and the value it will bring to give you the strength to follow through. 
  4. Don’t Quit: No matter how great of a business you have, you are going to have downtimes. There will be periods when things are dragging along and you question your decision to embark on this path. This is a time to put in extra hours, press harder, and make it work. Just when things seem hopeless, a door will open.
  5. Find someone already achieving the results you desire. Some refer to this as the “secret of success”. Seek out and emulate people already enjoying the results you desire and do whatever you can to work with them. As they say, "success leaves clues".

The Bottom Line

Many things need to go right for a business to succeed. To do this, you need to follow the tips outlined above, and, most importantly, you have to test your idea, pivot if necessary, and make sure you are providing the customer what they really want.


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