8 of The Most Common Reasons for Startups Failing

by Contributing Author

More than 20% of all startups fail within the first year. The reasons that start-ups fail are very often the same. It is things like failing to understand the market, market conditions changing, or having a flawed business plan. Read much more on the most common reasons for startups failing here.

Most startups face the same problems. Even though many small businesses can make it past these problems and reach success, almost 90% of startups fail. A little more than 20% fail within their first year of existing. The startup pitfalls that these businesses fall into are very similar. So similar that it’s easy to pinpoint. When you get to know these common pitfalls, it is much easier to work on avoiding them. This is why you should read this article on the eight most common reasons for startups failing and increasing your startup’s chances of success, whether through funding or by selling your business once it’s reached its peak.

1. Failing to understand the market

The first one is the most common of them all. Failing to understand the market is one of the biggest and most fatal mistakes for any business. If there’s no market for your business, there is no raison d’être and therefore no business to run. This is why it’s the first and foremost thing that you need to make sure you understand completely. Before you start a business, do a market analysis and make sure that the problem that you’re solving is one that actually exists. Too many new entrepreneurs get a good idea and just go with it – make sure that you’re not one of them.

2. Changing market conditions

Another very common reason new startups fail is that market conditions change before the business is properly established. This is something that you should consider in your market research as well much as possible. Look to the trends that are forming the future. Sometimes you can’t predict the future – as we’ve just seen these last couple of years. Some conditions you just can’t prepare for, but others you can.

3. Bad market timing

It also happens that a new entrepreneur starts a business with a great idea – but unfortunately at the wrong time. There are many reasons why the timing can suddenly be bad. Sometimes it is the smallest things that can change, and investors can suddenly bail on you. It can also be because a new competitor enters the market at the same time. Sometimes the timing is just perfect and this is what makes a business succeed. There’s not much you can do about bad timing besides looking for current market trends and trying to position yourself as the best option.

4. Flawed business plan

Another major reason for businesses failing is something that is entirely on you. It is having a flawed business plan. When you have a great business plan, you’re prepared for the future. You know where you’re going and how you’re going to get there. This is the necessary planning for any business looking to succeed. This is also where you describe your financial plans and marketing and branding strategy.

Your branding strategy is one of the many important things in your business plan. From the beginning, you need to think about branding. Choosing the right logo and the right name for your business is crucial. These are the things that your future customer will encounter and remember you by. You’ll find an online name generator that can generate business names based on your keywords.

5. Poor recruitment practices

Having the right employees is everything. This is why poor recruitment practices are on this list. It is very expensive to go through a recruitment process – especially for a small company it takes a lot of resources. The same thing goes for the onboarding process which usually costs thousands of dollars. This is why startups should be very thorough with their recruitment practices.

Make sure that you consider which position you need the most and focus on finding employees that can solve your particular issues correctly. Also, consider whether they fit into your business or not. It is very expensive to have employees, so make sure that you don’t hire too many people from the beginning – and make sure that you hire the right ones.

6. Failure to adjust

In business, things change all the time. Another major flaw for startups is the failure to adjust and adapt. To survive as a business in the twenty-first century, you need to be able to adjust to the changing and increasing needs and expectations of customers. You need to be able to adjust according to old and new competitors and adjust to the markets changing, economies changing, and so on. Things are always on the move in the world of business; you need to be prepared to do the same if you’re planning on staying in business for a long time.

7. Cash flow issues

Finances are also on this list. There are a lot of small businesses and startups that struggle with making ends meet. Cash flow issues are one of the biggest reasons why startups fail. Your finances are the backbone of your company. If you run out of money, it’s over. This is why you need to always prioritize keeping track of your books. In your business plan, you should have a complete overview of income and expenses, taxes, and so on. When you know exactly how much you make and how much you spend, you will have an idea about whether or not you’re going to run out of money any time soon. Make sure that this doesn’t happen.

8. Failure to learn from mistakes

As a part of adapting, you need to learn from your mistakes. Many startups fail because they’re unable to learn from their previous mistakes. This means that they will make them again. You can only afford to make the same mistake once or twice. Make sure that you try your best to make past mistakes into future strengths.