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CEOWORLD magazine - Latest - CEO Agenda - 20 Reasons Why Startups Fail In Their First 3 Years

CEO Agenda

20 Reasons Why Startups Fail In Their First 3 Years

Imagine this: you have a new invention or business idea, and you are ready to start your startup. However, the whole thought scares you when you consider the statistics of startup failures – they do not paint a good picture, with more than 50% of businesses failing within the first four years. That is one in every two businesses.

For you to make sure your business succeeds, you will need to input plenty of thoughtful planning and hard work. For you to avoid those pitfalls though, it is important to know the reasons behind their failure, which we will discuss below.

  1. Lack of a solid business plan
    Just because you have a brilliant idea, that is not enough for having a successful business – many businesses had brilliant ideas, but failed. Your business plan needs to have all aspects of success covered – including all the costs of marketing, staffing, technology that you need how you will market the business and the product, and so on.
  2. Research
    Do not just assume that your product is original or people will accept it, you will need to do plenty of research before spending your money getting an idea to fruition. For your business to succeed there needs to be a solid market for the products. It should also have a solid route of sustainability and profitability, before your capital ends – a major reason for business failure.
  3. Funding
    One of the costly mistakes you can make is assuming you will get VC (venture capital) easily, when the reality is that you will likely only get it from your friends, family, or your own pocket. One example is Stylecaret, an impressively large business that is valued at millions of dollars – as co-founder of Stylecaret, Nikki Singh, said back in 2018, “I had to rely on my own income and cut down my expenses to remain afloat as the business was starting, until it could break even.”
  4. Investors
    Make sure to hire an expert consultant when you are starting the business, and do not just rely on your own proficiency to get the attention of financing firms. You only have one chance to impress, so you need to put your best foot forward.
  5. Tech issues
    In the starting stages of the business, tech will be hard to come by, and there will always be anticipated delays. Because of this, you must have a buffer for it in your business plan. In addition, make sure to have a knowledgeable team with you and replace them if they fail to perform.
  6. Wrong team
    You cannot succeed alone – you need a solid team behind you. However, that does not mean getting that team is the easiest task in the world. You need to select them very carefully, and add as much diversity as you can in terms of newbie’s and experienced individuals.
  7. Personal ego
    Just because your idea is the most amazing and original idea ever, does not think people will be lining up to buy your products or investors wanting to fund your business. Always be realistic about everyone you meet, whether they are a customer or an investor. Relationships are always the key to success, and see you the way others will see you. Ego will destroy your business eventually, whether you know it or not.
  8. Old-fashioned values still persist
    Owning a business is a tough job – it is even tougher than being under salaried employment. For that reason, you cannot have old-fashioned attitudes as before; you must prepare yourself to work harder than ever before, all without little return on your efforts for a long time.
  9. There is no market need
    For your business to succeed, you need to solve a problem that users have. If your idea does not solve a specific problem, it will not grow, regardless of how bright it is. That is where market research comes in; so make sure you are fulfilling a market gap.
  10. Other startups out-compete you
    You are not in a vacuum, and you need to consider the competition you have. Many startups fail because similar startups in the same market outsmart them, in combination with other factors such as lack of motivation.
  11. Pricing problems
    You might have a great idea, but the final product is costly, so that results in underperformance of the revenue and sales areas, leading to failure.
  12. Poor marketing
    The world is competitive, and you must never assume that your product will sell itself. That leads to costly mistakes such as lack of advertising, marketing to the wrong audience, or using the wrong channels that your target audience does not use.
  13. Ignoring customers
    Any disputes or distractions are bad news – they tend to take away the focus from the customer. Never forget why your business exists; it is there to solve a customer’s needs.
  14. Mis-timing the product
    Launching the product too slowly or quickly can be very bad for the success of the business, so ensure you do plenty of market research before releasing products.
  15. Losing focus
    The frequent changing of ideas and visions will tend to make you too self-absorbed, lose your focus on why your enterprise exists, as well as the idea that sparked the product in the first place.
  16. Pivot going bad
    If you fail to do the pivoting carefully by using plenty of market and research data, will tend to lead the business in the wrong place – so you need to be careful.
  17. Lack of passion
    If you begin to lose interest in your idea, then that is dangerous – the idea quickly loses traction, and the idea fizzles out.
  18. Bad location
    It is important to have a solid location, which helps in the process of making the business succeed. This location also needs to have close access to the customers.
  19. Legal issues
    There might unfortunately be legal issues that might come up, especially when the business expands into different markets.
  20. Burnout
    The failure of the founder to take care of themselves leads to burnout, and loss of interest in the idea.

For you to ensure greater success for your business, you need to take care of all of the factors above, and make sure that you want your enterprise and ideas to succeed.


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CEOWORLD magazine - Latest - CEO Agenda - 20 Reasons Why Startups Fail In Their First 3 Years
Nirdesh Singh
Nirdesh Singh, co-founder and director at Zedex Info Pvt. Ltd. He loves to write and share about technology, startups, and business very often related to his business. He is also co-founder of FashionBuzzer, a fashion e-commerce portal. Nirdesh is an opinion columnist for the CEOWORLD magazine.