The Top 10 Reasons Startups Fail to Find Success

09/23/19 | 7 MIN READ

An extensive look at why startups fail to find success to help you avoid these issues.

Running a startup is a difficult endeavor for any entrepreneur, which means that you'll experience a significant number of struggles in the early months and years of this process. Before you delve into the lengthy and complicated process that comes with building a successful startup, it's important to understand that all companies run into their share of problems.

If you want your startup to garner success, it's essential that you do what's necessary to overcome these problems. Creating a startup in the U.S. will almost certainly prove to be an arduous task if you're not fully prepared for all of the hurdles that you'll need to navigate, which is displayed by the fact that around 90 percent of all startups in the U.S. will fail within the first three years of business.

The issue with attempting to create a successful startup is that there are many reasons that a startup can fail. Whether you don't plan properly for the future or you attempt to expand too quickly, there are a myriad of moving parts that you'll need to handle effectively if you want your startup to see continued success in the years to come.

The following provides an extensive look at the top 10 reasons that startups fail to find success, which should help you avoid these issues.

1. Lack of Planning

Many startups won't plan into the future because they feel like their idea for a product or service is enough to garner success. While having a great idea should help you in the early stages of forming a startup, you need to combine this product with a comprehensive business plan if you want sustained success. A lack of planning means that you'll be required to make decisions about marketing strategies  and product direction on an almost daily basis, which can be frustrating and time-consuming.

It's also very difficult to avoid distractions when you don't know what you're working towards. While creating a business plan might seem to be a daunting task, it will allow you to have a road map that you can reference in the years to come. This business plan should take your marketing strategies into account as well.

2. Expanding Too Quickly

No matter the industry you work in, it can be difficult to understand when it's time to expand if you've never created a startup before. Among the more common reasons that startups fail to find success is because they expand too quickly when they aren't actually ready for the demands that come with expansion. This ties back to a lack of planning in an obvious way.

When a startup creates a detailed business plan, they will have a firm understanding of the gradual steps that need to be taken when trying to gain success. Without a business plan, you'll likely find it difficult to determine when the time is right for expansion, which can easily cause you to expand far too quickly.

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When you expand your startup too quickly, you may be unable to maintain every other aspect of the company, which will likely prove to be problematic as time goes on and may worsen your reputation among your customers. Some of the dangers of growing your business too fast include making mistakes with your cash flow, hiring the wrong employees, not properly scaling customer service, and making management mistakes. Even one of these problems could sink your startup. Only expand when you have the resources, time, and experience necessary to do so without many bumps in the road.

3. Hiring the Wrong People

If you're an entrepreneur who believes in your product/service and has a good idea of what it will take to create a successful business, you likely understand that you'll need to hire employees throughout the process if you want your business to properly handle growth. However, many startups will hire the wrong people who aren't right for the job.

For instance, some startups will focus on hiring their friends for jobs who may not have the expertise necessary to take on the challenges of the position. In the formative stages of your startup, it's imperative that the people you hire are great for the job. If you hire the right people, you'll find that your company will function properly.

If you've never hired employees before, there are some general hiring tips that will make this process go much smoother and should minimize mistakes in the hiring process. For instance, you need to ask each prospective employee about why they want to work at your company and how they would tackle common problems that occur in a standard workday.

You should also try to fit the personality to the job. If the job that you're hiring for requires regular conversation with other employees, management, and potential investors, you should hire someone with good social skills and an outgoing personality. Likely the best method to simplify the hiring process is to have a proper HR team within your startup. When you hire an HR team for your startup, they'll be able to handle the finding, recruiting, and training of all applicants, which will make your job easier.

4. Lack of Adequate Funding

If you have a great idea for a product or service that you believe can be successful, you need to market this idea to prospective investors if you want to be able to grow and expand your startup in the years to come. While the initial funding for the majority of startups is comprised of personal income and investments from friends and family members, you're almost certainly going to need to obtain outside funding. While a lack of adequate funding is a common reason that many startups fail, it's also a simple problem to remedy since you can seek funding through an array of different avenues.

Likely the first type of funding that you should seek for your startup involves one or more angel investors. These individuals are typically looking to get in on the ground floor of new and exciting startups. You could also join an incubator or accelerator if you want to gain the resources necessary to succeed without needing to spend too much of your budget.

Other types of funding that you should consider as a startup include venture capitalists  and small business grants. By obtaining more money than you might require at the moment, you should be secure in the strength of your business. If ever an unforeseen problem occurs, you'll have the funding necessary to address the problem.

5. No Online Presence

social media contact

If you want your startup to be successful, it's almost required that you build an online presence for your company. Many startups fail to find success because they focus solely on delivering their product or service to the market without any thought towards the need for an online presence. The best way to build your customer base and appeal to the modern audience is by setting up a strong online presence, which requires effective marketing skills.

In order to create an online presence that elevates your startup and brand, you need to build a website for your business as well as a social media presence, the latter of which can be done on such platforms as Facebook, Twitter, Instagram, and LinkedIn.

The key towards marketing your startup successfully on your website or social media page is to provide customers with relevant content on a regular basis. A strong online presence will grow your customer base, which can pay dividends in the future.

6. Poor Product

If you've thought of an idea for a product and believe that it would sell well when placed on the market, it's essential that this belief is backed up by market research. First, ask yourself if the service or product that you want to develop provides any kind of value. For a product or service to be successful in today's market, you must either provide customers with an entirely new product that answers a problem or provide them with a product/service that's a refined and better version of something else on the market.

If the product or service that you've thought of has high competition among other companies, you might want to avoid placing too many resources into the idea. However, a product that's in high demand would almost certainly experience initial success.

7. Not Being Customer- Focused

Numerous startups will fail to find success because they aren't customer-centric with their approach to running a business. If you want to obtain continued success, you should show your customers that they are important to your business. For instance, do you provide good customer service to your main customers? If you can't easily answer this question, you likely aren't doing enough to provide assistance to your customers. Your primary audience needs to be able to create a relationship with your company that builds trust.

If you run a social media page on Facebook, a great way to show your customers that they are important is by engaging with them in comment sections and by answering the questions and problems that they might have. If you have a website, make sure that your customers can reach you and will be provided with a prompt response. If you're loyal to your customers, they will be loyal to you. Without taking the necessary steps to make your business customer-centric, it's likely that your success will be short lived.

8. Pricing Conflicts

competitive pricing

competitive pricing

When you're looking to set a price for a product or service that you offer, it's important that this price will be appealing to your target audience and won't conflict with what your audience expects. If the products that you currently sell are known for being reasonably priced, it's recommended that you stick with this approach.

Many startups will change course and attempt to price one of their products higher so that they can market it as a luxury product. While this marketing approach can work from time to time, it's also very risky for smaller startups that have yet to gain a loyal customer base. High pricing may significantly restrict the population that you can reach. Avoiding pricing conflicts will lessen your risk of failure with your startup.

9. Poor Management Team

management team

Once you've progressed past the concept stage of your startup, you'll likely need to hire a management team to assist you with running the business. Many startups will fail to find long-term success because they've hired the wrong team to manage the company. A common problem with a poor management team is that they don't provide workers with the right management or enough work. This team could be providing your workers with poor guidance and impossible workloads, which is a recipe for disaster.

Some management teams will be slack and lazy on a consistent basis, which means that work won't get done and business goals will be missed. The management team that you hire must be right for the specific type of company that you're building.

The individuals that comprise the management team should know how to properly manage large projects while also knowing how to delegate tasks to others when necessary. The first step towards building a successful startup is to make the right hires.

10. High Competition

Nearly 20 percent of all startups will fail to find success because there's too much competition. For instance, any company that attempts to make a smartphone will invariably find it difficult to gain success in a market that's dominated by Samsung and Apple.

While you'll almost certainly have some competition no matter the type of startup you create, you don't want your product or service to be competing with many other companies that have already garnered success. Entering a highly competitive market will make it difficult for your company to be unique to visitors and users. If your competition mainly consists of big brands and big companies that have years of history, it's highly unlikely that you'll be able to gain a significant share of the market.

Finding Success in your Startup

If you're interested in building a startup business, it's critical that you know the top 10 reasons why startups fail to reach success. After you fully understand these reasons, you should hopefully know what to look for as you navigate your company to success, which should make your chances at success much greater.

No startup can thrive if they don't know what to do when they reach an obstacle in their path, which is why it's best to have this information on hand before you create your business.

If you're a medtech or bioscience entrepreneur who is looking to get a startup off the ground, make sure that you apply for wet lab incubator space at University Lab Partners, which is the very first wet lab in Orange County! This incubator space will provide you with all of the tools and resources necessary to grow your startup and reach success in the bioscience or medtech industries.


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