Girl in depression

Startup Mistakes That Almost Always Lead to Business Failure

| 4 minutes read


  • Most of a new startup doesn’t accept the technology change.
  • As per Forbes, approximately 29% of the startups couldn’t solve the complex conundrum of managing finances.
  • Vacillate to take a risk and lack of experience also leads to business failure.

Somewhere you must have heard about the failure of a startup, but do you know why the small businesses end up early? Business failure isn’t something you want to think when you start a business. There are various factors equally responsible, and there is a broader difference between- decision making and implementing decisions in business activities.

One poor decision can hurt your potential for success, or at least set you back. There is not a fool-proof plan to reach 100% startup success, although there are few crucial measures that can minimize the risk with higher possibilities of success.

Success and failure are two sides of the coin- if you want to turn the table towards your side, it becomes important to avoid few illogical mistakes, and most of the startups lose their grip at the commencement of the business.

Here are a few essential measures that boost the startup and maximize the success bar-

Be Prepared to Face Legal Challenges

The first thing to be precise about when starting the business is the kind of business you want to set-up. Depending on the structure, the business is formulated- whether it could be a partnership, sole proprietorship, private limited company, a public company, or a limited liability partnership. For every business structure, certain legal requests should be followed. For example- a limited liability company has to be registered with the Ministry of Corporate Affairs under the Limited Liability Partnership Act 2008.

Also, make sure that all the required agreements relating to the startup- Articles of Association, Memorandum of Association, and co-founders agreement- are in place. This also guarantees that no legal complications are left when a dispute arises in the future.

After a certain procedure, a business license is required to run a business without any disruption. For example, a startup engaged in the food business has to obtain a license for food safety and health. The conditions mentioned in the license have to be fulfilled. Failure to the prescribed conditions can lead to license cancellation or hefty litigation.

Undervalued Your Products or Services

It has been observed that a lack of confidence in your ability and fear of failure causes you to under-price the product and services. It undervalues your planning structure, motivation, and capability. This might turn out to be a perilous path because it undermines the exceptional value you bring to the table and opens up the possibility of resentment. Also, recovering from undervaluing your goods becomes important because it helps you to identify the best entry price of your product for what you’re selling.

Lack of Passion/ Losing Focus

Innovative ideas lead to the growth of the company, but what if ideas change or you lose the focus on the goal set? CNN report also suggested- approximately 65% of the startup post-mortem founders found a lack of passion and conflict among co-founders. Also, the lack of knowledge for a domain was a key factor for failure, no matter how good an idea is.

Doughbies, a cookie delivery service in the US, raised $670,000 on-demand cookie service in 2014. It failed because of a lack of interest from its founders and team. At the beginning of their business, the company appeared to be doing well, with 36% gross margins and 12% net profit at the time of shutting down. CEO Daniel Conway said “Although there was not a massive growth and we were not sure to run the business for a longer time. Finally, we shut down our business because our team is ready to move on to something new.”

Poor Marketing

Knowing your market and the target audience, how to convert them to leads and ultimately customer satisfaction is one of the reasons for a successful business. For any business, market strategy, survey, and research should be implemented before launching the product. It is also a common failure among founders who liked to build a product, but who didn’t relish the idea of promoting the product.

Once you’re sure about the business line-up, it is important to do marketing and advertise your product on a larger scale as per convenience. Mind diversion leads to business failure and financial loss.

Lack of Investment

Money and time are the two important finite things that need to adjust judiciously. Now the question is how to spend money wisely? As per reports by Reuters, approximately 29% of the start-ups suffer from a failure in the first year of their business.

In 2019, September, augmented reality (AR) startup Daqri shut down after burning through more than $250M in funding and failing to raise a new round from investors.  The European budget airline WOW air also met a similar fate.

Starting a startup is easy but to continue and fund for a long time is difficult. To sustain in a market, you should have a reliable team that can respond and works accordingly as per business requirements.

Pricing/Cost Issues

Pricing is an art when it comes to startup feats and startup post-mortems highlight the difficulty in the pricing of a product. And to eventually cover production costs but low enough to bring customers in.

Common mistakes startups make with the price of running a company- which is calculated too high compared to the revenues generated. The company should not focus on huge profits but they should also take care of the cost. The company spends money in different categories including labor, production, sales, and marketing costs. The majority of the startups suffer from cost issues because they are not able to mark out the correct price of the product because of the competition in the market and most of the companies fail to keep an aggressive pricing strategy.

With the above information, these are few essential and effective measures to avoid startup failure. Small scale industries become effective and contribute to the country’s economy at a larger scale. All you need is to take precautions and calculative risks while implementing plans and executing strategies.

SHARE THIS POST

About the author

Related Posts