Why do startups fail?

Startups fail. Constantly. While failure can be as good a lesson as success, it can cost a lot of irreplaceable damage in terms of time, economics, and individual will. In order to avoid failure, to the extent that you can, you must be first equipped with the knowledge of why most businesses fail. Think of it as learning from the experience of others who have walked the road before you.

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Here are four common reasons that can make an entrepreneur shut shop.

Absence of a clear USP

An article on forentrepreneurs.com says, “There is not a compelling enough value proposition, or compelling event, to cause the buyer to actually commit to purchasing. Good sales reps will tell you that to get an order in today’s tough conditions, you have to find buyers that have their ‘hair on fire’, or are ‘in extreme pain’. You also hear people talking about whether a product is a Vitamin (nice to have), or an Aspirin (must have).’’

To build a customer ‘must-have’, you must first build your knowledge of the customer. Entrepreneurs often forget that their customers are individuals, and that not all of them want a new designer shoe or the cheapest way to travel to Ethiopia. Some want a gas-lighter that lasts a lifetime, and others, a durable hold-all. Your solution must be rooted in a real problem. If it only adds to the noise – more cab services or more food delivery apps – you are likely to suffer a catastrophe.

Short-sightedness

As per an article on inc.com, “Startups can't afford ‘paralysis by analysis’ and it's simple good sense to realise that (they) can't anticipate everything in an undertaking that inherently involves the unknown.

That being said, there's truth in the corny old quote ‘failing to plan is planning to fail’."

‘Failing to plan is planning to fail’ is anything but a corny phrase. In an entrepreneur’s journey, it’s the most classic case of cause and effect. If your startup has failed, there are likely many small causes that led to the collapse, and in most cases, a single major one that caused a chain reaction of poor decisions, incomplete research, and an eventual fall in product quality. Failure, in such a case, is merely symptomatic of a much deeper cause – the inability or unwillingness to plan – not for the distant future, but the next day, the next meeting, the next minute – on the part of the entrepreneur. An entrepreneur suffering from short-sightedness is like a pilot suffering from partial blindness. The customer wouldn’t trust their life with one or their experience with the other.

Lacking business understanding

Investopedia.com says, “Cooking, reconciling spread sheets, and fixing cars are activities. Just as marketing, filing taxes, and addressing customer concerns are activities. Successful business owners must either be good at all of the activities and have the proper business acumen or be smart enough to realise their limitations and hire the necessary expertise.”

What the world at large is suffering from is man’s poor and inaccurate estimation of himself. In truth, man, the being, is ignorant of his innate powers as he is unaware of the unnatural fears he is capable of developing. The world of an entrepreneur is no different, and there are certain tags, impressions, and expectations that run parallel to the profession – guts, glory, money, and respect. If an entrepreneur lacks self-knowledge, he or she may fall prey to the tags without fully understanding their meaning and the allied consequences.

Running out of cash

According to an article on fastcompany.com, “Cash isn’t everything when it comes to starting a business, but when you run out of it, there’s not much that can help.’’

It’s not about being money-minded or miserly. But it’s all about being careful. Entrepreneurship is all about learning on the go. While there are different skills that you’ll bring to the table as a leader, remember there are always those that you can learn. For many, taking charge of cash – its arrival and departure so to speak – can be a rather daunting, or worse, confusing, aspect of starting up. In such a case, feel free to ask for advice and professional help.

Failure should keep no one from trying something new; something that will test their character and make them come face to face with who they have really become. Revelations such as this are at their brightest and clearest when one fails. But that does not mean that one must fail in order to learn. If you are driven by knowledge, empathy, and the ability to put thoughts into actions, you can build yourself a life that’s complete and successful in its realisation.