Why Start-Ups tend to FAIL

You have a great idea that will help a lot of people in the world, and you’re ready to jump right into starting a business. But before you do, think twice. Statistics demonstrate that 9 out of 10 start-ups tend to fail. That’s a staggering rate. From my experience of establishing a business and analyzing various start-ups over the past two decades, here are my top 3 reasons why I think start-ups tend to fail.

Hands down, a top reason why start-ups fail relates to their idea. More often than not, it comes down to whether there is a need for a product or service you are offering. I often ask budding entrepreneurs three questions: 1) Are you solving a problem with your idea? 2) Are you the first one to come up with this idea, if not what sets you apart from your competitors? 3) Are you validating your idea? If you’re not answering “yes” to all these questions, then the truth is you need to re-evaluate your idea. Executing your idea is just as important, keeping it in thin air will do you no good and will put you in a bottomless pit of no results.

Poor planning is such a common experience for start-ups in many ways. I’m always startled by how many start-ups haven’t established a business plan – a basic framework that expresses how they are going to grow their business, along with a revenue model that clearly demonstrates how their product or service will make money. Having clear growth targets and understanding precisely what you need to accomplish to reach those targets is what allows 1 in 10 start-ups to succeed. It’s so important to have a BHAG (Big Hairy Audicious Goal) – a long term goal (let’s say 10 years), followed by small term goals such as 5-years…1-year…90 days, etc, that will lead to your BHAG. The point is, to achieve your grand vision, you must create baby steps on how to get there. Otherwise, you’re just walking in the dark.

Another part of planning includes creating a corporate culture to on-board the right people on your team. I can’t stress enough how important it is to find people who are trustworthy are willing to use their expertise in their field to make your vision into a reality. So many start-ups fail because they have the wrong team members in place, the wrong investors at the table, and the wrong people giving advice. I always make sure to prioritize in hiring people who are a cultural fit over their skillset. At the end of the day, I want to be with people who I can work well with. Skillsets can evolve over time…incompatible personalities are a different story.

Customers are the bloodline of your business and without them your business will not exist. That’s why I believe the most critical reason why start-ups fail is that they don’t listen to their customers. Getting feedback should be a priority! How else would you know what’s working and not working? If you’re getting negative feedback from your customers then you need to do some re-evaluation and optimization to improve your business, product or service. However let’s say you are receiving pretty decent results, there are customer suggestions out there, but your team is lagging behind to take action. Let me tell you this, the results will eventually plummet and it is most likely that sooner or later, your business will fail.

So please listen to your customers because they’re the reason why your business. Responding to feedback will help improve your product or service to attract more and more customers. Because we all know that a good product or service can will speak for itself. And of course, ensure you have an exceptional customer service team in place to get insights and satisfy your customers’ needs. Everyone says that start-ups are full of mistakes, and it couldn’t be more true. Being able to respond to these mistakes quickly and effectively is a quality of a great entrepreneur. It may be true that only 1 in 10 start-ups will make it. But with a well-structured idea, a solid plan, and a knack for listening to your customers – you will have a great chance of turning your idea into a reality.