Why Startup fails?
You may have often seen that most of the start-ups got closes in their first year
They have an idea but still, the company got closed
So in this article, we will talk about the top 10 reasons behind every startup fail.
If you are also planning to start your own venture so please consider all these 10 reasons.
The first thing is what is the type of industry
Whichever industry we have chosen is that right for us or not?
For Example – As you guys, all know I was a marketing head at an E-commerce company
Where I realized that too many things are going wrong in this industry.
The cost of the product that we are selling is for 4800 and the same product was selling on Amazon is for 4100 on his platform.
Including all the taxes and profits. How is it possible?
Then I realized that they are playing a BIg game
We were placing orders for 100 products but they might be placing an order for 50k products
maybe that’s why they are able to sell their products in such competitive pricing.
There are chances that they have a lot of funds that’s why they are trying to destroy the market
So that no other e-commerce platform wouldn’t d be able to compete with them.
Another big reason behind this they are considering their logistic cost to zero
They consider their logistic cost as loss for now
There are so many factors which make me realize that if I want to open an e-commerce store like Amazon or Flipkart so I wouldn’t be able to flourish
Because I don’t have the same amount of fund that they have
or how long I would able to fight with them 1or 2 years.
After then I will be broke like so many other’s companies.
Now come to the second point and that is a faulty business model
I think that If I do this business so I would be profitable.
But, If I do overall calculations so I will find myself in the loss
For example – we open a factory
and product costing is coming 80rs
And what we do next is we made all the plans regarding the selling price and all
Then we decided that we will sell this product at a profit margin of 95 rupees.
Then we did all the packaging and branding of that product.
Then we got to know that the price of raw material frequently fluctuates.
In starting, the price of raw material was 60 rupees and now it is available for 110 rupees.
So now Can I increase the price of my product?
No, Because we did all the branding and marketing of that product for the pricing of 95 rupees.
Or maybe at the timing of calculating the total cost we made some errors.
We didn’t include rent and employees salary under that calculation.
In short, we have to make our strong business model.
If we don’t want to let our startup fail.
There are many businesses which are in auto-pilot mode in which money comes automatically.
Like I told you about Trivago Business model(search on the website
Now comes to the third point and that is marketing myopia.
let me tell you how marketing myopia affects business model.
Sometimes, we feel that our product is the most optimum product for the consumer.
For example – You decided that you are going to make pager that is used a long time ago for only sending the messages.
I hope that you will know something about pager you can search it on search engines.
You are making pager in this modern era and telling everyone that your pager is a touch screen.
But the consumer needs a touch smartphone with a strong camera, display, processing power
But No you have already decided to sell pager.
By doing things in this way your business will come to an end like Nokia.
Along with that, we also have a week feedback system.
In initial days every business product is going through the developing stage.
Right now even they don’t know what kinds of problems customer’s are finding in their products.
We think that our product is good
But until we asked the customer’s about our product feedback and asked them how was our product?
We have to ask our customers about possible changes and other things.
When we received feedbacks and work on it so the customers become loyal to us.
Maybe he couldn’t buy my product before but I simply called him and develop my product according to his feedbacks
After then I said thank you because of him I able to make changes in my product.
Now, there are high chances that he will buy one more time from you and if he like your product then he will recommend others.
Ultimately your customer base will be increased
So basically we have to build at least one feedback system doesn’t matter what kind of business we are doing.
So we can get in touch with the consumers directly
And know where our product is lacking and what kind o possible changes can be done.
If you are in the service industry, for example, you own a salon.
you should always ask your customer about his experienced and his suggestions.
Many companies use feedback form so that is also the part of the system.
Next point is you do n’t have a passion for doing business.
He just got into the business because of the peer pressure.
I have seen that go daddy makes websites for businesses for 100 or 1000 rupees.
Will try to expand his father’s business by running ads
But why would I do it? Because my friends are doing business
People don’t know about the industry and they do not have any experience but still, they do business.
What happens after then, if business got fail they feel demotivated.
Ultimately the company got wasted
As a boss it’s totally your responsibility to do the project in the right way.
None of your clients will blame your employee, they will blame you for anything which goes wrong.
Ultimately, all the clients will go away and the company will shut down
There’s a huge blunder for any startups which is lacking necessary skills.
Even if you don’t have a passion still you can do business by learning it,
But if you don’t have the required skills for running a business then you are going to face a huge failure.
The next point is we have a wring team members.
What we did is we hired some of our cousin’s brothers or sisters and also hired our best friends and all.
Because we think we have a good understanding so that we can do great business.
Yes, understanding between team members is necessary .
we hired our siblings and friends
And we tell them to learn while doing the work
Ultimately this thing will lead us to waste of time, money and resources and at the end, the company will come to an end.
So we should make a team of those who know different skills set.
So by doing this thing altogether, we can become an idle team and grow our company.
There is no doubt that understanding between members is also important so don’t avoid it as well as.
But the most important thing is to complement other’s
The next thing is the cash burn rate
cash burn rate is how much money do I need in a month to run my company
It should be a total of all the expenses like marketing cost, rent, the salary of employees, and all.
For example, we have a 10 lakh rupees and the rate of cash burning rate is 1 lakh rupee per month.
So it means we can run our company for just 10 months.
So we have to keep this thing in our mind with the purpose of making it profitable within 10 months.
Otherwise, after then we will have to shut down it.
Or If you have already started a business without knowing your cash burning rate
Or you think you will decide your cash burning rate after a few months.
So it means your company is going to close soon and all the money will be wasted.
And the last point is which includes two sub-points. First one is you failed to raise funding for your start-ups.
You have a good business model but you always failed while pitching your business model in front of the investor.
And because of that your business usually fails
We have already made a series of funding to investors. So you can check that series.
Funding to investors is also a kind of art.
You have a good business model and burning cash rate is also low and you may also cross the break-even point
But in order to grow your company to a big level. you need some funds
Along with that, the second point is you are hungry for the funding in your initial days of business.
Equity of your company gets dilute by receiving quick funding.
In the starting days of business, you have to dilute 30-40% of your company equities for some funding.
And because of that, all the power you had earlier is now shifted to the investors.
For example – If you are able to cross break-even point within 8-10 months. it means your company is in profit.
In this stage, you need to work on your company 1 year more to make it more profitable and capture some more market share
After then you can go for funding if you want to.
There are many companies who shut down just because of o f f
They all were just running behind the funding and then had some issues with the investors and because of that, they didn’t give any funding to them.
And the entire AskMe group was destroyed overnight.
So these were the top 10 points which you should consider while starting of any kind of Startup.
I takes my labourious effort for this , please share this as much as possible