Why do startups fail

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Starting a company and making miles in a business vertical happens to be a dream of those starting a new business. But making profits in this highly competitive world happens to be the other side of the reality which everyone doesn’t foresee when they venture into a new business.

Recently, CBInsights conducted a post-mortem related to startup failures and ended up in concluding that more than 50% of small businesses, irrespective of their industry they are into, fail in the first four years. In fact, the research firm says only 4 % of them will reach to the fifth year and might also survive the next few years as well.

After studying many startups, especially in the technology field, the researchers at CBInsights have come to a conclusion that the primary cause for a startup business to fail is

Lack of Finances- Many business owners start their business without having clear-cut knowledge of their financial bandwidth to start and survive in future. This misconception about their finances leads to a stage where the firm could not survive in the market after building a product and finishing its testing phase.

Product Market Fit- Most of the firms builds solutions which do not fit in the phase of the current market context. Thus, as their idea or the product is not competent enough it fails to generate the curiosity among buyers or consumers leading to business downfall.

Competition sustainment- Most companies which are new in the field fail to focus on the strategies which offer upward revenue models and thus fail to compete with their peers who are in the same market. Due to sheer ignorance and lack of pro-active measures to outcompete their peers, and lack of timely market analysis these firms fail to see light after 12 months from the start date.

Service pricing or product pricing not right- Startup companies are often found committing a mistake in pricing their products and services on a competitive note. This can be due to lack of knowledge on current consumer needs and some abrupt decisions taken to quickly capture the market startups. Eventually, all this leads to the phase where the company’s products and services do not satisfy the customers when it comes to price point. And as a result of this phase, companies start seeing a downfall in sales which leads to loss.

Conclusion

We all know that failures are inevitable. But if you try out new ways of doing a business, it can not only help in shaping you as an individual but will also help you prepare for much bigger risks and who knows it can lead to reaping in even bigger rewards.

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Naveen Goud is a writer at Cyber Security Insiders covering topics such as Mergers & Acquisitions, Startups, Cyber Attacks, Cloud Security and Mobile Security