If you are aspiring to be an entrepreneur, the most important thing you have to know is that only a few startups are successful. The internet is flooded with postmortem commentaries on failed startups that include entrepreneurs recalling mistakes that proved fatal to the company. You may have heard that failures are the stepping stones to success but isn’t is preferable to learn from other’s mistakes than make your own?
Although lack of funds are responsible for shut-downs, it is not the only reason. The following are the top five reasons why startups fail even when they are well-funded. The good news is, knowing is half the battle.
- Lack of demand for the product
According to a research, the top reason why a startup is unable to succeed is because there is lack of need for the product/service in the market. Even a great marketing plan cannot force people to buy a product they have no use for. The best way to get around the problem is to have a realistic understanding and judgement about market conditions before launching the product. If market research is not your forte, then outsource the task to professionals who can take care of the whole process, right from survey design to data analysis.
- Absence of the right team
The second biggest reason for unsuccessful startups is the inability of the founder to bring together the right people for the job. It is not enough to just hire a bunch of smart people with fancy alma mater. Members of a good team should be able to balance each other’s strengths and weaknesses, while pursuing a clear common objective. Correspondingly, even a good team can fail to deliver in absence of efficient leadership.
- Not gauging the competition properly
This is another area where a good market research plan can save a budding company. Many startups fail because they don’t have a good answer to the question-What are we doing so differently that we can win the market? It is important to monitor your competition, not only for valuable inputs about the market, but also to identify holes in your own business model that can be plugged before it is too late.
You may have developed a great product, but it is important to know how much the market is willing to pay for the product and to what extent that pricing will sustain your business. Whether you price it too high or too low, you will struggle to generate revenue in both cases. Also keep in mind that when the company fails to live upto the expectations of paying customers, it constitutes to charging a high price for an average product. Bad pricing strategy doesn’t take long to sink a company.
- Ignoring customer feedback
Being unmindful of feedback can only lead to failure of the product and company. In this digital era, when collecting user data has become so easy, hearing what the customer has to say is as important as rolling out a great product. Customer feedback will help you in adapting to demand and stay competitive.
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