The Small Business Administration (SBA) of the United States published a report in 2020 which claimed that startup failure rates are around 90%.
21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.
With such a staggering number of failures, it’s important to understand the common mistakes entrepreneurs make so that you can avoid them while building your own startup.
Startups can fail due to a variety of factors, both internal and external, after all running a startup takes a lot of patience and skill along with a healthy dose of luck.
Though it’s impossible to compile an exhaustive list of why business ventures fail, the following are some of the more common reasons why entrepreneurs fail to build a sustainable startup.
Top 7 Reasons Why Most Entrepreneurs Fail
Lack of Planning and Research
If you are starting a business, it is important to plan everything meticulously in order to understand and deal with the most intimate logistics of the business. Lack of planning and research about your market and target audience can lead your business to falter. For example, if you open a grocery store right next to Walmart, chances are your business venture will fail because of the location. And if you’d done market research, location scouting, and understood your target audience, you would have picked a location where there was a gap between the demand and supply.
Running Out of Money
A popularly cited reason behind the failure of most startups is accorded to lack of money which can happen due to lack of funding, running into losses, providing more discounts than you can afford, or losing investors from your team. It means being unable to pay regular salaries to employees or paying back creditors. This can lead to a downfall, both, in quantity and quality of services. In order to maintain the quality of services, it’s important to have a smooth functioning plan that brings in a steady flow of income.
You can always opt for SmartBiz PPP Loan which is a small business loan that can be acquired without the hassle of going to a bank.
Not BEING Able to Adapt
The world is still suffering the after-effects of a pandemic that is refusing to leave. Last year was a rough ride for most entrepreneurs, a lot of work just couldn’t be done from home and their startups suffered the brunt of it. But being able to adapt to a new, emerging situation and making the best out of it is an important skill that every entrepreneur must have. If you’re not able to think outside to box to adapt to a difficult situation, your business might fail, if not now then maybe sometime in the future.
“It is not the strongest of the species that survives, nor the most intelligent. It is the one that is most adaptable to change.” – Charles Darwin
Not Having a Plan B
Diving headfirst into your business and believing in your idea is a good thing, however, having a backup plan is never a bad idea. You cannot expect your business to forever operate in a cookie-cutter situation where external forces don’t change. Preparing for risk and unpredictable eventualities by having a plan B will equip you to withstand some of the most difficult of challenges. Thus, it is essential to evaluate the risk and have a plan B.
Targeting the wrong demographic or not getting the messaging right can pose serious risks to your startup. For example, using words, idioms, and references from the 90’s when your target audience is Gen Z or X.
Entrepreneurs must, therefore, analyze the consumer segments their marketing is attracting and if their marketing campaigns are being well-received by them.
Also, make sure your campaigns aren’t making any politically incorrect statements.
An infamous example is the Pepsi ad featuring the popular supermodel, Kendall Jenner. The ad features her offering a Pepsi can to a police officer in a bid to resolve a protest, who then takes it with a smile portraying an understanding between both sides bringing an end to the protest. The ad received well-deserved backlash for its insensitivity in using a serious humanitarian event for monetary gains.
Bad PR is Bad PR – Don’t Let the Quotes Fool you.
Not Playing to Your Strengths
If as an entrepreneur, you move out of your expertise to accommodate everyone for everything that is beyond your understanding, you are bound to fail. Valuating your services correctly and ensuring you’re not stepping out of your means to offer something ‘trendy’ to your customer will definitely backfire.
Poor Soft Skills
Making lasting connections with your consumers as well as your vendors, investors, and other stakeholders of your company is an important aspect of keeping a business running smoothly. If you become too arrogant or controversial or demand everything to go your way or lack empathy, you are bound to fail. A brand’s reputation is created by the people working behind it, thus maintaining good interpersonal relationships will create goodwill for your brand and a lack of it might prove catastrophic for your business.
Even though running a business is not an easy job and requires a lot of things to go right, proper planning and execution will give it a good head start.
And always, always stay updated about customer preferences and the current trends – it’s the core for your startup’s success.
Even on hard days, you may survive because you’ve planned and prepared for it. You might come back with a bruise or two while unprepared startups suffer a killing blow.