10 Reasons Why Startups Fail and Ways to Sort Things Out


It’s been ages, and we are still left with a question that most of us don’t have an answer to. The question is “why is it that most businesses fail only a few succeed? Well, this question has now been modified from businesses to startups, which is quite justified as nowadays every single individual is planning their own startup.

Not to demoralize you or anything else, but if you are planning on building your startup, there are chances that you might fail. It’s not us making irrational statements; instead, it’s the stats that show about 95% of most startups fail within their first few years of existence. However, if you succeed in determining those reasons, your startup might as well succeed.

In this era where competition is just blowing up the roof, as a business owner, there are some pitfalls which you need to dodge as they can make your business to crumble and ultimately fall. Now today we’ll be discussing those pitfalls through which you can find ways to mend them and make your startup to stand out from the crowd as this is something you came here looking for.

Top 10 Reasons Why Startups Fail

Here are 10 of the most common reasons why startups fail and along with that, we’ll be listing some ways through which you can slide past them.

  • Inability To Manage Finance

Most of the time business owner gets caught up with various aspects that they fail to keep track of their investments. It is nearly impossible for you to run a company without knowing where the money is going.

Whenever business owners start making money, they tend to spend it quite irresponsibly and that too on unnecessary things. What they forget, is their business still has a long way to go.

What Needs To Be Done? The best way to keep any business running smoothly is to make sure that you control your expenses at all times.

  • Lack Of Competitive Advantage

A startup fails to succeed when it fails to develop a competitive advantage over their competitors in the same market. In layman’s term, it can be said, when you can’t justify, why your target audience should consider your service/product over your competitor’s.

Every single startup should have a competitive advantage, as it can help you earn profits, sales, and most importantly success. The main problem which a startup tend to face, is that they are new and don’t have the sufficient budget to compete on a larger scale, which ultimately force them to use price as competitive power.

What Needs To Be Done? So, if you’d like to make a name of yourselves, then you need to make sure that every product and service that you are offering must have a clear and distinctive competitive advantage over its competitors.

  • Management and Leadership Failure

It is hands down the most common challenge that startups tend to face. There are chances that you might be a great founder, but being an exceptional manager is quite a task. If being a business owner, you fail to provide great management services; you might end up with a failed attempt to establish a business.

What Needs To Be Done? The first thing that you need to do is to educate yourself regarding the skills that miss. You can do that by consulting a mentor or participating in various business training programs.

Secondly, you can always consider examining what other businesses are doing and seek the ways through which you can apply those methods in your business.

  • Lack Of Interest Towards The Business

Most of the businesses out there are established for only one reason and that is to earn maximum profits, well, these are those companies who don’t last long in the market.

If you started a business which you are not passionate about, then it is just a matter of time when you’ll lose interest, and ultimately your business will start falling into a dark abyss.

What Needs To Be Done? Step into such industry that matches your interest because then only you’ll feel motivated to work and earn money from it.

  • Inappropriate Location

Bad location to establish a business has always been considered a red flag in the business industry. however, there are startup owners who completely neglect this fact, as they have the thought that other businesses are doing good in that particular location.

Whenever you set up a business in a poor location, you’ll find yourself, investing more and more money just for the sake of sustaining your business.

What Needs To Be Done? Whenever you go lookout for an appropriate location, make sure to address and determine your target audience along with the services that you’ll be offering.

  • Fail To Provide Value to the Customers

Speaking as typical consumers, we need value no matter what. If a business fails to do so, there will be no reasons left for them to consider your business; they’ll start relying on your competitors, instead. Always ask yourself, “Are you listening to your customers? And are they happy of what you are providing them?

What Needs To Be Done? To keep your business running smoothly, you need to make sure that you are delivering legit value to the customers. Whatever ventures your business is a part of, you need to make sure that your customers are happy and satisfied at all costs. Consider conducting surveys just to get deep insights into what your customers are looking for.

  • Not Working With A Team

There are so many business owners who think running a business alone is a one man job, which is completely irrational and not the way to go. They think hiring and working with a team is just a waste of time and money.

What Needs To Be Done? Instead of working alone, hiring a great team of individuals will definitely help you reach your proposed targets way ahead of time. While hiring such individuals, it is crucial for you to examine every possible aspect of that individual, as hiring wrong team member is not acceptable at any cost.

  • Lack of Funds

Running out of cash is something that startups fear the most. Sometimes lack of funds is the outcome of business owners underestimating the number of funds needed to run their business without facing any issues.

What Needs To Be Done? It is important for you to know the amount of money that you’ll need to run your business. Other than that, don’t ever forget to raise funds.

  • Absence of Planning

This is one of the common issues that you can find in every second startup. Establishing a startup is not just limited to registering it, opening it, and providing the services. It’s definitely not the way to go. Ask yourself, if there is no business plan, no marketing plan, no market research, is it possible for your startup to taste success? The answer that you’ll get would definitely be no.

What Has To Be Done Instead? Keep an eye on a handful of businesses that are successful, and try to execute their plans into yours. Moreover, you can consider consulting with a professional to make an effective business plan.

  • Overexpansion

Nowadays, most startups tend to fail because of overexpansion. It happens when the owner couldn’t differentiate between success and growth. The owner gets pretty hyped with the success, resulting in making irrational decisions like expanding the business.

There are certain things you need to look at before even thinking of expansion; are you meeting the customer’s needs, is there sufficient workforce available?

What Needs To Be Done? Don’t ever think of expansion in the first place. Instead of that, make sure to conduct full-fletched market research with your team. Check whether the initial business is doing well or not.

Wrapping Up

Launching a startup is one aspect and maintaining it until it tastes success is another thing. With the facts and reasons that we enlisted above, we have made things quite obvious that establishing a startup is not a child’s play. So, we recommend you to follow these guidelines whenever you find yourself stuck in any of the above issues.