Why Start-ups Fail

4 Reasons Why Startups Fail

In this era of serial entrepreneurs and hot IPOs, it’s easy to get caught up in the stories of startup successes. From crowdfunding to strategic online marketing and viral content, today’s young businesses have the best opportunities to quickly grow into multi-million dollar corporations. But behind all of the glitz and glam of the entrepreneur lifestyle, there’s a shocking truth. Unfortunately, startup failures are far more common than most people realize, and the reasons why may surprise you.

Here are 4 reasons why today’s startups fail, even when the people involved have all the tricks of the trade.

1. No Market Need

According to a CB Insights infographic, the number one reason why startups failed is because they had “no market need.” In other words, there was no customer base or no specific reason why a customer should buy into their product or service. In order to be successful in business, you must solve a problem for your customer. If there’s no problem to solve or no specific customer to reach, you’ll wind up putting all of your money and time into a useless product or service. 

This is why it’s important to test your product or service among a small market of consumers and get feedback on what’s working and what isn’t. There’s nothing worse than investing all of your efforts into a business idea that’s not sustainable.

1. Ineffective Team/Low Morale

When we hear about a business going belly-up, people often assume it was because of a lack of cash flow, and while that is often the case, you have to ask yourself why the company’s profits faltered in the first place. Unsurprisingly, the people who make up a company play a dynamic role in sales performance and customer reach. When a team is ineffective or when the company culture is compromised, productivity slows, products and services are not sold, and growth becomes nonexistent. 

To function as a well-oiled machine, everyone must be on the same page and employees must be treated with the utmost respect. Sales cannot be made without a motivated team pulling the reins.

1. Lack of Customer Care

Customer care should be at the very top of every business’s priority list for obvious reasons. Stemming off of reason #1 for startup failures, if there is no customer, there is no business—and it’s as simple as that. It’s your job as a business owner and service/product provider to exceed your customer’s expectations, listen to their needs and wants, and respond accordingly. The companies, startups especially, that fail to do this are almost guaranteeing their downfall.  

1. Money Troubles

To no one’s surprise, money problems are a huge factor in the failure of a startup; however, they are not even close to the top of the list. Business is fundamentally a human endeavor—humans trying to connect to other humans. Achieving success in product development, technology, business models, and funding are the result of getting both your team and your customers right. So, ultimately, startup success comes down to people, both the people inside the organization and the people outside of it (customers). Once this important priority is nailed down, making money becomes second-nature. Earning money fails when the team fails; you can’t have one without the other.

Let these findings serve as a warning for aspiring entrepreneurs. Yes, the entrepreneur, “grind” lifestyle is what’s in now, and you may be eager to be self-sufficient, but there’s more to business than just proclaiming that you’re an entrepreneur online. People must be your priority, your values must be aligned, and you must have a sound business plan that takes everything into account. Your customers and your team drive your business and ultimately determine whether you’re here to stay in the business world or not. Ignore them at your own peril.