Reasons for the failure of start-ups

Every person who starts a business venture jumps into it with the expectation of making it big. Every founder thinks his start-up will be the next unicorn, and he will be rolling in millions of dollars soon. The reality is harsh – 90% of all start-ups around the world fail.

For every successful start-up, there are 9 others that have failed. There is a reason for this. There are some very common mistakes that cause a start-up to fail. Let’s discuss some of them.

No market for the product/service
Multiple surveys have shown that the most common reason for the failure of start-ups is that their product or service doesn’t really solve an existing problem. Often, founders are so confident about their ideas being revolutionary that they the all-important step of testing the market. Not including the most important component of success, consumer opinion, has led many a start-ups on a path of doom.

Missing Customer Empathy
One thing which matters significantly for entrepreneurs is the understanding of their customers along with the problem/Gap/need that is being addressed by the entrepreneur. A natural tendency among us to jump t solutions and execution makes a shortcut where customer empathy and problem validations takes back seat. This is where the belief becomes blind belief for many entrepreneurs.

Inability to manage funds well
Most entrepreneurs put a lot of stress on getting their idea funded. However, once they have access to the required capital, they don’t use this resource optimally. In most cases, the reason is the founders are specialised in fields like engineering, sales or marketing. Finance is not their strong suite. Despite this, they refuse to take hired help citing cost cutting.

Improper team selection
A company is as good as the people working for it. Many first-time entrepreneurs don’t put enough time and effort into ensuring the right people manning the right positions. It doesn’t just involve getting people who believe in your cause on board, but having people with the right expertise in the team.

Leadership problems
This also includes the founder’s own ability as a leader. The important thing is to delegate the responsibilities to people qualified for the job description. If you are more of an ideator and less of a people’s person, let someone else handle the employees. Perform a SWOT analysis on yourself like you would on any other employee and come up with an honest assessment of yourself. Delegate the jobs you can’t handle to those who can do them well.

Better competitors come along
However revolutionary or disruptive an idea may be, once is in front of the world its very easy to copy. This best of start-ups will give rise to a bunch of copycats. Sometimes, these copied versions can solve the problem so well that the first-mover advantage no longer holds any water for the original company. This can be avoided by ensuring that the company doesn’t become complacent after the first taste of success. There must be continuous market research to know the feedback of the consumers and improvement in the product or service based on it.

Now that you know the common mistakes that lead start-ups to failure, we hope you can steer clear of them. We at Lemon firmly believe that #AnyoneCanStart and what matters is learning from past and others to move fast in a smart way. For any more help you can always depend on our expert mentors at Lemon School of Entrepreneurship.