It’s no secret that most startups fail within their first few years. According to Forbes, nine out of every 10 new startups won’t get off the ground or won’t stay off the ground once they launch.
This doesn’t mean your new business is doomed for failure. But it does mean you need to know why 90% of startups fail so you can avoid the same fate.
That said, here are some of the most common reasons why entrepreneurs and startups don’t make the cut and what you can do to be a part of the 10%.
There’s no market need for the business
Approximately 42% of entrepreneurs fail because there’s no market for the service or product they offer. You don’t want to be a solution that’s looking for a problem.
Products or businesses that you create because you think they’re interesting or clever won’t get you very far. You need to consider a problem that needs a solution and go from there.
The business went bankrupt
It’s not uncommon for businesses to file for bankruptcy. In fact, by the second quarter of 2016, up to 25,227 companies filed for bankruptcy in the United States.
Small costs add up quickly when you’re starting a business from printing business cards to buying URLs to website hosting. If you’re not expecting these costs, you can end up running out of cash faster than you can launch.
To keep yourself from falling into a financial trap, plan your startup costs to be double your estimate. This will give you a wider safer net.
You don’t have the right team
It can be exciting and a lot of fun to start a business with your friends or family. But it’s important that the team you work with has the skill set you need. Sadly, up to 70% of all business partnerships fail.
Up to 50% of job applicants falsify information on their resume to obtain a job, so be sure to honestly assess the skill set of those you’re hiring. Find team members who not only believe in the mission your business is presenting but also have the skill sets your team is missing.
It may also be worth considering having internal auditors on your team. Internal auditors perform assurance services, risk management, and control processes for your business. They can help to keep your business safe and secure by spotting issues before they become disasters.
The competition won
It’s never a good idea to ignore your competitors. When your competition comes out with a service or product that’s similar to yours, it’s vital to the success of your business that you know that product inside and out. The more you know about your competition, the more you know why your service or product is better.
Even if you’re not better than your competition, you can work until you are. Only working to create a better product or service will make you more successful.
The business lacks a higher purpose.
When your business doesn’t have a higher purpose to fit into a better vision of the world, it can be hard to succeed. When throwing together a business just to “make money,” it can drastically hurt you motivation and happiness. What happens when you get this money? Take lottery winners, for example. A recent study found that those who win large cash prizes shouldn’t expect to see an increase in day-to-day happiness. With only 33% of Americans saying that they are happy in their daily lives, chasing money won’t help. Make sure that your business has a higher purpose than just to make money. Not only will it help your internal motivation, but also help the world when you succeed with these tips.
There are many reasons why businesses fail, but also many reasons why they succeed. By budgeting correctly, paying attention to the competition, hiring the right team, and knowing your market, you’ll increase your chances of being the 10% of startups that succeed.