Startups have been a huge phenomenon in almost every industry but what is even more shocking is that statistics show that only 10% of startups survive. Within the first year of its life, a startup is extremely vulnerable and almost 90% of startups fail. While a lot of people turn their attention to the successful ones, you can learn a lot out of failing startups too. In fact, failing startups have their own set of characteristics and here a few things that they have in common.
1. A Rag Tag Team
Everyone has heard of the stories behind huge companies. Apple, Facebook, and Microsoft are the most prominent ones; getting their start in dorms and home bedrooms. However, the success of all three businesses was highly dependent on the skill set of the team that was working on it. Sure everyone can start a business but if your team doesn’t have the necessary skills, your startup will face a lot of difficulties.
2. No Need in the Market
Market research is necessary and a business always needs to have a purpose. You have to see a need to be able to fill it. On the other hand, if the need is limited, or non-existent, you cannot start a business and hope to see it succeed. Even if your product is ahead of its time, you need to have the budget to successfully educate the target market. Look at Uber which revolutionized the way you get a cab or Grub Hub and Food Panda that took food delivery to the next level.
3. No Room for Growth
Every business needs to consider growth as one of its goals. Eventually, a business will grow up and its structure should be made to accommodate this aspect. With no room to grow, a business will eventually stagnate and become useless. By not being flexible, you end up getting stuck in a rut. This ends up being the downfall of many businesses, even the big ones. Just look at Xerox and Kodak as an example.
4. Poor Use of Resources
Startups are popular because they can be set up with small amounts of capital and resources. However, to keep a startup functional, the limited capital and resources have to be managed very smartly. In this phase, even a small mistake can end up costing a lot of money and mean wasting a lot of energy and other resources. If you make too many mistakes, you could end up damaging the startup completely.
5. Stunted Cashflow
Cashflow is another reason why startups can fail. With almost no cash coming in and too much money going out, the startup will be functioning on an unhealthy, lop-sided structure. While it is understood that no business turns a profit when it is starting out, if it runs in this manner for too long, it could end up causing the business to shut down.
These are among the most common things that failing startups share but there are even more. If you’re thinking of launching your own startup, be smart and do prior research.
