Top 8 reasons why startups fail


Top 8 reasons why startups fail

Top 8 Reasons Why Startups Fail

Starting a new business venture is exciting, empowering, and incredibly nerve-wracking! Unfortunately, not all startups are successful – in fact, 90% of them fail. Your first year is absolutely crucial for getting everything in place to make your startup business a success. Luckily, recent research by CB Insights gives us the top reasons why startups fail…


No market need

A whopping 43% of startups failed because there was no market need for the product or service. When times get tough, consumers cut back spending on luxury products and focus on the necessities. A strong product or service that your potential clients need, not want, is most likely to bring you success.

Run out of cash

A healthy cash flow is essential for a business to be sustainable. 29% of startups fail because they run out of cash. Avoid falling into this trap by limiting your expenses at the beginning. It may be tempting to create a funky office space kitted out with all the latest gadgets, but it isn’t a number one priority. Budget wisely, and put aside a portion of your profits for business development as your startup grows.


Not the right team

23% of startups fail because the team just isn’t right. Whether it’s a disagreement over the direction of the business, or workers that lack motivation, the wrong team will destroy your company. Make sure you invest in getting the right people on board. Host team strategy meetings, catch up with your team members, and give them to training and tools to do their jobs. A happy team is a productive team, and you’ll gain respect and loyalty in return.

The right team

Get out-competed

It’s a dog-eat-dog world out there! There’s no secret that big corporations have purchasing power and weight behind negotiations. This means big companies can provide their products at a lower cost than independent startups. And when it comes to other startups, they’re all jostling for a share in the market just like you. 19% of startup business fail because they are simply out-competed. To be successful, you must have the right level of expertise with a unique selling point (USP). Do you provide the BEST personal service? Perhaps your startup has an ethos of social responsibility. Whatever it is, a strong USP will set you apart from your competitors.

Pricing/cost issues

18% of startups fail because their products and services are too costly. Market research is your friend here. Don’t blindly whack a price on a product and hope for the best! Research what’s already available so you can find the ideal pricing for your business. Remember to consider your location: big city prices will seem extortionate in a small town. On the other hand, pricing too low in the city could affect the perceived legitimacy of your business. Research your potential clients well. What jobs are they likely to be in? What is their income? How much can they afford to pay for your products and services?


No business model

Prior planning prevents… you know how it goes! A great idea is just the start. 17% of startups failed because they didn’t have proper plan to make money. So work out your business model before you go into business. You’ll need to plan your business revenue and outgoings; will you need to pay premises costs? Staff wages? Will you work with freelancers or other businesses? Create a business plan with a financial forecast. Use it as a working document as your business evolves. Or, ask the experts for help. (We have some excellent tools to assist you here… email and ask about our start-up business packages.)

Poor product

It goes without saying; the quality of your products is imperative to success! An unbelievable 17% of startups failed because their products weren’t up to scratch. Those businesses may have had a great team, good finances and an excellent business model, but it simply isn’t enough. Test your products before you enter the market, get feedback and make improvements to avoid the dreaded 1-star reviews!


Poor marketing

Having a great product or service is worth nothing if nobody knows about it! The most successful companies spend around 12% of their income on marketing. Conversely, 14% of startups failed because their marketing activity wasn’t on point. If all you have is a business Facebook page, your startup will struggle to take off. You should always budget for marketing during the planning stages of your business. Make sure to use intelligent marketing to get the most for your money. We recommend using a tailored approach designed with your business and clients in mind. Email us to arrange a FREE marketing strategy consultation. Find out how we can help make your startup business a success!

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