Why Start-up's Fail - 10 Reasons To Consider

why-start-up-s-fail-10-reasons-to-considerToday, I am reminded yet again why start-ups fail.

I met with a lovely couple a few weeks ago who wanted to open a retail store. They have a dream to work for themselves and the wife wanted to be in fashion.

They are new to the market and have never owned a fashion outlet, but they both have passion and are determined to do it.

I asked all the normal questions;
And the questions went on and on. Many could not be answered.

My immediate reaction was to encourage them to do their due diligence. To develop a business plan and do market research.
hope they prove me wrong.

Even though they are both really nice people, my gut tells me that they will open a store and fail. I really hope they prove me wrong.

Start-ups fail for many reasons. Some through no fault of their own, and others because the buddying entrepreneur has not done their due diligence and were acting on a whim.

Starting a business is not for the faint hearted particularly if you take the steps to sign leases for premises and hire staff. It can not only cost you a lot of money, it may even cripple you.

10 Reasons Why Startups Fail:

  1. Market: No market research into viability of selling a product or service to a market segment.
  2. Economy: Economic downturn directly affects your business (i.e. retail)
  3. Business Model: No investment in developing a business model or ignoring the obvious when developing your business model that is too much about 'you' and not enough about your market.
  4. Capital: Running out of money, cash flow problems and being undercapitalized to start off with. Short cuts along the way may mean that your brand is impaired.
  5. Too much focus on you and not who you are trying to sell to: Entrepreneurs who name a company after something that means something to them, but nothing to their customers. They pick colours and store fitouts based on what they like, not what the market is looking for.
  6. No point of differentiation to competitors: Going into an over-saturated market with the same copied product and trying to make it work will be a disaster.
  7. Location: Location is king - if you cheap-skate on location, you may find that you set up shop where no-one will find you. The result will speak for itself.
  8. Pricing: No real pricing strategy and not enough investigation into the figures. Make sure that you know when your business will break even, what your costs are to run your business and what your plan is upfront if you don't get enough sales in the door at the start. If you price your product competitively and find that no matter how much you sell, you can't make a dollar - yet your competitors with greater buying power are making a killing - then you need to reconsider your pricing and product strategy.
  9. Ignorance: Contrary to the saying, ignorance is not bliss. If you are ignorant about running a business and making it profitable, chances are you are going to fail. This is not a game of monopoly. This is real life, with real money and real responsibility.
  10. Listen to those who have been there and done that. You will get pearles of wisdom from people you least expect. The greatest business success stories come from people who have learnt to listen.
And... two extras for good measure which are the most important of all...

PRODUCT: Do your research. Make sure you are not starting up with a product that has no chance of succeeding in the market. Make sure that there are people in the market that would want your product. Don't compete head to head with industry leaders with no point of differentiation. Ensure that your product is quality, professional and represents your brand.

MARKETING: Develop a brand that resonates with your target market and then develop a marketing strategy to make sure they all know you exist, what you do, where to find you, why they should choose you over others etc.

Did you start a business that failed? Share your story with me on This email address is being protected from spambots. You need JavaScript enabled to view it.