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5 Key Reasons why most Start-ups Fail

Posted on Posted in Startups

Several startup failures can be categorised into few common and classic mistakes.

 

1. Build a product / service which is not required 

Many entrepreneurs feel that they want something, and everyone else will need it too. It needs a thorough analysis and validation which entrepreneurs tend to not do well. They try to find facts that support their hypothesis and eventually their idea fails.

 
2. Cash flow runs out 

This is the most common reason why most startups shut down. They run out of money. Sometimes it maybe attributed to the fact that their business build failed. But sometimes its also due to poor planning of cashflow and undermining the fact that customer payments, investment process, etc. takes longer than estimated. The number 1 job if an entrepreneur (and of any CEO for that matter) is to ensure that there is cash in the bank to keep the company going.

 
3. Team issues 

Entrepreneurs may not appreciate the value of their team, the pillars on which their idea is being built. Co-founder issues, Board level fall outs, poor team build out, cultural challenges among the team members etc. lead to startup failures. After all, a startup will only do as good as its team is capable of.

 

4. Business does not scale 

Some ideas make sense and even at the  proof of concept level or early launch stage, it seems successful. But when it comes to scaling the idea across the target market, it turns out to be challenging, unviable, uneconomical, etc.

 

5. Lose Focus 

Sometimes entrepreneurs have to pivot, but there is a fine line between pivoting and deviating to non-essential areas which are tempting in the short run but ruin the business in the long term. Its easy to lose focus and end up wasting valuable time away from core areas.

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