Failure is an important part of any entrepreneur’s development, but it’s also something every business owner wants to avoid. One of the best ways to protect a new business from failure is to know exactly what might cause failure and defend your business against it.
Here are five reasons startups fail, and how to prevent your company from falling victim to these issues.
1. You waited too long to launch.
Launch should be at the forefront of every entrepreneur’s mind from the moment they conceive an idea. Unfortunately, perfectionism often gets in the way of the ultimate goal when it comes to realizing a new product or service. Many startups fall into failure because the founder was trying to add every last additional feature to his product.
There is a reason why so many successful startups have versions 2.0, 3.0 and so on. By launching with the basics, you can not only start earning money sooner, but you’re also able to collect actual customer feedback to determine the future of your product. You might find that the advanced features you were itching to add don’t actually matter to your customers.
Delaying a launch in the name of perfectionism can cause your startup to end up deeper in debt and more likely to fail. Instead, push your product out into the world and let the growth happen from there.
Risk is at the heart of entrepreneurism. Being overly cautious has caused the death of many otherwise promising startups.
Financial risks are often some of the most daunting and challenging for entrepreneurs. A lack of startup cash has led to insecurity and caution on the part of many an entrepreneur, ultimately causing the failure of the business.
The need for mountains of startup money is a myth. My business partner and I launched SaleHoo, an online wholesale directory, with about $1,000 in our bank accounts. We begged, borrowed or promised an IOU for as much of our initial expenses as we could, including our developer. For everything else, we dipped into our tiny startup fund. Less than a year after launch, SaleHoo had 10,000 members and began generating a profit. Starting a business doesn’t have to take thousands of dollars, especially if you’re launching a business online.
Industry leaders don’t achieve their level of success by staying safe. One must be able to gamble the resources that are necessary to realize their vision, even when customer demand is uncertain.
3. You tried too hard to be original.
Most startup founders stand on the shoulders of giants. It’s incredibly difficult to create a truly original business idea, and it’s often unnecessary.
Originality is not only unnecessary; it can also be detrimental to a startup because it can make it difficult to connect with your customers. New ideas are hard to process for the mass market. Better versions of old ideas? Those resonate—quickly.
When we decided to start SaleHoo, we weren’t the only supplier directory, but we knew we could be the most trusted and that we could supply the best educational resources. Like most businesses, SaleHoo was introduced within an existing market. Rather than waiting to be struck with a brand-new concept, we moved forward by improving an existing one and found success.
Instead of trying to think outside the box, think about how the box can be made better. Offer above-average customer service. Make an often used product more user friendly. By putting a spin on your business to separate it from the competition and continually responding to customer feedback, your business won’t suffer from the never-ending search for originality.
Founding a company on your own is incredibly difficult. For many entrepreneurs, one of the most challenging elements of startup development can be sacrificing control and realizing you can’t do it all.
Business partners have a myriad of benefits, but the most important is that you’ll become more well-rounded. If selected carefully, a business partner can strengthen your company in areas where you’re lacking.
I chose to partner with Mark Ling because his marketing skills and online business experience complemented my own. We met through a squash league as teenagers, and after reconnecting with him and discussing my business idea, I knew our skills and personalities would be a match.
The downfall of many startups is that the founder was spread too thin. A business needs constant nurturing, and one of the most effective ways to provide that is through a productive partnership.
5. You didn’t track enough of the right data.
The best business advice I ever received is to measure the metrics that matter. No other company is precisely like your own, so there’s no better data for planning improvements than your own, and it is never too early to start collecting that data.
Benjamin Yoskovitz, co-author of Lean Analytics, writes, “The one metric that matters is all about finding the right thing to track at the right time, based on the type of business you’re in and the stage you’re at.”
Tracking the right analytics early is crucial because only your own data provides the greatest insight into what works, what doesn’t and how to improve, which is the foundation of sustaining a successful business. Without the correct information and enough of it, many businesses fail because they don’t know how to progress.
Because of the inherent risk associated with starting a new business, avoiding failure every time is nearly impossible. But that doesn’t mean you can’t play defense against it.
The entrepreneurial mindset requires that you believe with every facet of your being that you will succeed in your new endeavor. By acknowledging and resisting these pitfalls, you can rest easy knowing you did everything you could to circumvent failure and ensure the success of your business.