Every new entrepreneur, before launching their startup has questioned, what if it fails. What if my profits slack and sales dwindle?
The idea of a startup is intimidating because 90% of them fail. To be sure your business doesn’t go down the same road, it’s best to understand why startups fail with some remedies to prevent the failure.
Let’s read about these failures:
Failure to Address Customer Pain
Unfortunately, there is a fair share of founders who think their idea is brilliant, and it should be built into a product right away. This is a recipe for disaster. I know two mortgage recruiters from my workplace who quit their job to launch a product they were very excited about. The only problem was, they forget to do the test if their target audience actually needs it.
Consumers are extremely reluctant to try a new product from a startup. They will only try your product if it can’t solve a problem, which nobody has addressed so far. The straight-up solution to this problem is not to launch a product in the market until you’re certain it will solve a customer pain point.
Reluctance to Seek Feedback
Don’t turn yourself into those founders who refuse to let anyone see or test a product until it’s perfect. They are afraid someone might steal their idea. Well, failure to get feedback while your product is still in a prototype stage is a big mistake.
The right approach is to develop an inexpensive prototype and keep on receiving feedback so that you can improve it while it’s still in progress. Repeat this until you’re the product you end up creating is actually demanded by customers.
No Passion for the Market
Hands down, if you are not passionate about the market and your primary motivation is money, you are a not going to last for long. If you would really like to succeed, you must make your startup your life’s mission.
Whether or not you are passionate about the market is determined during the early stages of product development. Do you understand what your product’s aim is? Whom are you building it for? What problems can it solve? What can it achieve in the market?
While doing market research, don’t forget to test the demand for your future product or service. Don’t build something people don’t desire. To solve this problem, conduct thorough market research. Dig into it like you deeply care about it.
Poor Team or Leadership Skills
Did you know that 23 percent of startups fail because of the wrong team? The first problem starts when you hire people who lack the technical expertise mandatory to convert your idea into a product. When developers who lack the right qualification build a product, it’s going to be below the standards, and no one will use it.
The next problem is poor management or a leader who lacks the qualities of a good leader. In this scenario, even if your startup idea is promising, you won’t be able to address external challenges, which can affect the quality of the production, important decisions, product development, marketing, and so much more.
Poor communication can also cost significant losses. Don’t be the type of founder who cannot work closely with his team. If you don’t communicate, you will always be in the dark. Your development team might end up creating a product that doesn’t meet your vision.
Failure to Raise Capital
Raising capital for a startup is a painful process. You will be faced with significant rejections.
Failure to raise enough capital is not the only problem. Some entrepreneurs reach out to the wrong group of investors. Why would someone invest in your business when they are interested in it in the first place?
Experts say that raising capital is a full-time six month’s job. You should start the process before running out of money. Otherwise, you will have no choice but to shut down your business.
Poor Financial Management
It’s important to keep track of where your money is coming from and where it is being spent. Keeping track of the financial health of your business helps identify problems in advance. When you do find problems, don’t leave them on the backburner.
It’s equally important to have a contingency funding plan in place so that you can pull out the reserve in the event of a financial crisis. Use accounting software such as QuickBooks to keep a record of all financial transactions. Or you can hire a bookkeeper to manage your financial affairs.
Starting a business is an exciting endeavor, but you could head towards failure without proper research and planning. To prevent your startup team from failing, implement the performance appraisal methods. Find the right people and avoid the mentioned mistakes to avoid failure.