Many self-made billionaires in this era made their bones from small startup companies that they managed to grow into a billion-dollar industry. Mark Zuckerberg (Facebook), Elon Musk (Tesla), Evan Spiegel (Snapchat) and many other CEOs owe their early success to their innovative startup companies that eventually made it big.
Now it cannot be denied that many entrepreneurs aspire to be the next Zuckerberg or what have you. This is the reason why a lot has jumped into the startup bandwagon in the hopes of making it big and introduce an innovative product/service that can change consumer lifestyles and introduce a trend.
Establishing a startup company seems easy – you start with a brilliant idea, hire a small team, develop the product/service, market and grow it. Setting up the company is the easiest part, the real challenge comes during actual work collaboration, planning, marketing and management of the company.
This is why countries like the US and UK can report a high number of startups every year – but the success rates are dismal. In the US, only 10% of startups survive after 5 years in business. In the UK and , around 50% of startup companies close shop just after 3 years. So why do many startups fail? And how did the others survive? Here are five reasons why:
Leaders had a good grasp of business and finance knowledge.
The knowledge and attitude of the founder can greatly dictate the fate of the company. If the founder did not had a clear vision to begin with, then the startup would inevitably suffer as a consequence. Bad business decisions and lack of financial discipline are huge factors as to why most startups fail.
Products/services are unique and well-developed.
Many entrepreneurs start a company because of a lightbulb moment – thinking that their new idea for a product/service will be the next best thing after the iPhone. However, this is not always the case. Most startups fail to deliver a unique and innovative product that could revolutionize the market in any way. Those who do however, do have a higher shot at success, but these are the founders that took risks, studied the market, and acquired enough funding to improve their initial products.
Growth is steady but sure.
In the startup industry, there is a middle ground. If you’re growing too fast or too slow, then you’re not doing it right. Sure, success does not happen overnight, but if the company have been stagnant for over 5 years, then something must be done.
Rapid growth and expansion can usually cause founders to neglect the nitty gritties of the business, such as managing cash flow and hiring good talent to retain. Going too slow however, can run the company at risk of being overtaken by competitors.
Successful startups have their growth planned out (more or less) – like aiming to reach unicorn status by the 7th year or so. It does not have to happen fast, but it should still happen at its own calculated pace.
Great marketing strategies and customer engagement.
This is also another aspect that many startups fail in. However good or interesting a product or service might be, it would still be hard to attract customers without a good marketing strategy in place. Poor customer support will also make companies lose prospects fast – and eventually lose sales.
Good market timing and foresight.
Introducing a new product is also about good timing and foresight. You may have a revolutionary product in mind, but if the market is not yet ready for it, then success would still be hard to come by.
Business foresight and intuition are skills that are quite hard to learn without a business mentor. This is why it is best to establish a startup with a partner or co-founder that can help put more things in perspective. In fact, 99% of successful startups have more than 2 founders, successful solopreneurs in the startup industry are a rarity.
All these reasons actually boil down to one thing – having a plan. Being successful as a startup don’t just happen, they happen because the founders laid out a well-researched plan, complete with plan Bs and Cs, along with back-up plans for each.
Gemma Reeves is a seasoned writer who enjoys creating helpful articles and interesting stories. She has worked with several clients across different industries such as advertising, online marketing, technology, healthcare, family matters, and more. She is also an aspiring entrepreneur who is engaged in assisting other aspiring entrepreneurs in finding the best office space for their business.