Reasons Why Most Startups Fail

India is among the fastest-growing startup economies in the world. India had the third-highest number of startups followed by the US and UK. The main reason behind this growth is that the majority of the population is young in India. About 40% of people are under the age of 35 years, and almost every 3 out of 4 startup founders are under 35.

Most startup founders and entrepreneurs think that they are creating the next big revolution in the respective industry. However, in reality, 90% of them fail. The reasons for failure could be many ranging from lack of product-market fit to insufficient capital.

To achieve success, entrepreneurs should be aware of common challenges, so they don’t make the same mistakes that others have already made. In this article, we review common reasons why startups fail and how to avoid failure and work on things that actually create value. Here’s a dose of reality.

Inadequate pricing

The biggest error startups make when it comes to pricing is assuming that price alone drives sales. However, it’s not always the case. Do you know what drives sales? A sales and marketing team that knows how to communicate the value of what you’re really offering. Which is why filling those roles with the right individuals is so important.

With that said, it’s important to think carefully about pricing upfront. Price too low and you’ll go out of business from bad margins. Price too high and you’ll go out of business because you don’t have enough customers.

Deviation from target

During the early stages of business, entrepreneurs need to handle multiple operations to kickstart their business- incorporation, funds, recruiting, marketing and advertising, networking, and developing the right product or service. Amidst these activities, entrepreneurs give divided attention to all these areas, without accomplishing anything substantial.

Focussing on one thing at a time or getting advice on these different business operations from their subject-matter business consultants can help entrepreneurs multi-manage these activities more efficiently.

Inefficiency in the team

A diverse team with various skillsets is very critical for the success of a company. Many founders cannot do what is required for a business to turn successful. Both the founder and the team should focus on industries related to their skills and academic background. The skills they possess should be complemented with that of the team. Disharmony in the team might not help the business take off. Sometimes, there can be disharmony among investors of a company that could result in failure.

Market status

Identifying the correct market and problem is not easy. If you end up making a solution for a problem which nobody has or is insignificant, you risk losing all your effort and resources into failure. The demand for a solution also depends on the timing when you are releasing it.

Premature scaling

The goal of many startups is to not be a startup anymore. They’re all in a hurry to scale. Scaling refers to hiring people, getting funded, releasing new products, entering new markets — and growing too much too soon. Unfortunately, not everything is as smooth as it may seem. In reality, up to 70% of startups scale too early and, as a result, do things out of order. As they say, slow and steady wins the race.

Insufficient funding

One of the most common mistakes that a majority of entrepreneurs commit is bootstrapping their startups with their personal savings or with the money provided by their family members or close friends as a loan. Getting investors for your business may sound a good idea initially; however, you may have to share the margin of your profit with those investors later on.

Getting business funding is tough for startups, and rejection from lenders may shatter your dream of setting up a business. Lack of sufficient money is the most common reasons why startups shut down within the initial five years.
If your startup fails, it’s worth spending time to understand what went wrong. That’s the only way you’re going to improve the odds of making it next time. And, yes, there will be a next time. Hopefully, this list will help you avoid a different pitfall. To learn more about how to avoid the difficulties faced by a startup and grow your company swiftly, follow me @…