The Top 3 Reasons Startup Businesses Fail and Tips for Success
By Lisa King
Starting a new business is not easy. Smart entrepreneurs realize that there are risks involved in starting up any new business. An unstable market, a lack of funding and choosing the wrong team, are cited as the top three reasons why startup businesses fail. But take courage, there are things you can do to ensure that you are on the road to success.
Determining Market Need
The bottom line is this: If a strong demand for your product is absent, the business will fail. Approximately 42% of startup companies fail because a market need for their product is non-existent. Therefore, it is crucial to research the size and the health of the market in which you are entering. To estimate market size, entrepreneurs must know the problem their product will solve and the value it will bring to consumers. Once the target customer is defined, one must determine how many other companies have similar target consumers. The next step is to divide the number of individuals who will buy or use the product by the market size to determine market penetration. Determining market value and making changes in your product if necessary, is crucial to the success of your business.
Receiving Adequate Funding
Around 30% of startup businesses never get their product off the ground, simply because they do not have the funds to survive. Often times it is difficult to find investors willing to fund the business. Networking and social networking can be a great way to meet investors. When pitching to investors it is crucial to highlight their return on investment and exit strategy. Let’s face–it most investors are investing to make money.
Joining a startup accelerator or incubator can make your business more appealing to investors. However, it is important to research the pros and cons of each.
Additionally, participating in conferences and fundraisers are a productive way to realize funding. Take advantage of fundraiser sites such as Kickstarter, Indiegogo, GoFundMe and Kindful. Share your campaign with friends and family. Involve your community by placing an ad in the newspaper or contacting professionals in your area with similar interests.
Above all, make a list of the 10 most influential, professional people in your life and communicate with them about your endeavors on a regular basis.
Choosing the Right Team
Roughly 23% of startups fail because they chose the wrong team. It is important to remember that venture capitalists typically invest in the team, rather than solely just the product. Therefore, it is wise to choose team members with diverse backgrounds and a variety of technical and soft skills who are willing to not only support, but also challenge your decisions.
New businesses require employees who understand the market sector and are able to provide sound advice. Hiring a financial officer is also critical to sustain viability. A strategist should be brought onboard to ensure the company is making money and evaluate ways to increase revenue. In addition, every company needs a group of megastar employees who are willing to get down to business and gets things done!
Through the consistent efforts of a solid, professional, well-selected team, under capable leadership, with proper funding; reaching success in a thriving market is inevitable.