Startups Fails and Startups Success: Defining the Key Causes

Every day new businesses appear and new outstanding startups are born. Every day, some of these companies end their lives.

This is a completely natural process in business life when some startups succeed while some of them do fail. However, it’s always interesting to know the reasons and prerequisites. Why does this happen?

In this post, we briefly define the relevant percentage of startups that fail, why they fail and what should be done to prevent it. However, let’s immediately delve into the relevant statistics and backup our theses with apparent numbers and facts.

How many startups fail?

The last 5-10 years, the most common figure that worries startup founders is related to the percentage of startups fails – this figure ranges from 75% to 90%.

This startup failure rate is based on different studies that define various reasons of failures: lack of focus, passion, and motivation, unwillingness to see and listen, wrong advice from the wrong people, lack of good mentorship, lack of specific business knowledge, raising too much money too soon and so on.

Why do startups fail?

One of the fundamental studies researched dozens of startups to compile a list of the top reasons startups fail. The key focus was on company level reasons for failure.

Top 10 causes of small business failure

Here are how small businesses explained their fails, illustrated it with top 10 causes:

  • 42% – no market need
  • 29% – the lack of financing
  • 23% – not the right/weak team
  • 19% – got outcompeted
  • 18% – pricing issues
  • 17% – user un-friendly product:
  • 17% – the lack of effective business model
  • 14% – poor marketing
  • 14% – poor customer focus
  • 13% – product mistimed

All these startup mistakes are business-related, team-focused and tied to leadership and the ability to build a strong team and drive a business model.

FYI: top-5 industries with the worst startup statistics

The following 5 were the least profitable industries in the US last year:

  • 6/9% – Oil and gas extraction
  • 5,1% – Software publishers
  • 3,7% – Beverage manufacturing
  • 0,4% – Forging and stamping
  • 0, 3% – Semiconductor and other electronic component manufacturing

Now it’s worth looking at the opposite side of the question:

Why do startups succeed?

There are also many types of research that study the reasons for startups success. Many of them suggest that serial entrepreneurs that have prior success are more likely to achieve success again.

According to one of the famous research, there are14 indicators of startups business success. Here’re the most important points from this set:

  • Willingness to observe, listen and learn
  • Founders’ impact that is resulted in passion and commitment
  • Commitment to stick with a chosen path
  • Being ready to adjust
  • Patience and persistence
  • Evolve the right mentoring relationships
  • Balance of tech and business knowledge
  • Success in general and specific business knowledge
  • Implementing the principles of the Lean Startup concept (raising just enough money to hit the next set of key milestones).

FYI: top-5 fastest-growing small business industries

Last year, most popular industries with the top number of small business startups were covered by:

  • 11% – business services
  • 11% – Restaurant/ food
  • 10% – Healthcare/Beauty/Sport
  • 7% – General retail
  • 6% – Home services

Most obvious accents, you should care of to make your startup succeed

1. Make your product perfectly suit the market

Many people all over the world evaluating the reasons of startups fails, say “They made products no one needed”.

If you are going to rock the market with the help of your outstanding startup, make sure it is the right product or service for the right market.

To get more about the subject, dive into our previous article about 11 Ways to Promote a Startup For Free.

2. Do not ignore any detail

An excellent product idea or a perfect team is not the only guarantee of business success. Small things may unexpectedly turn into large things. Never ignore business processes and the company’s challenges as such ignoring can eventually deprive you of any future in the startup.

3. Ensure fast grow factors

Fast growth is not always unsustainable. Fast growth is what investors, entrepreneurs, and markets want. Rapid growth is the sign of a good startup idea.

Startup founders should never be satisfied with marginal single-digit growth rates after many months of performing. Growth leads to growth. The startup that is not growing is shrinking.

4. Learn your team how to recover

A good team may become the main lever to build startups’ success. The more team members are, the better chance they have to create an outstanding product or service.

Versatility means not only an appropriate skillset but also mindset. Any startup team should be able to change product, take up new marketing approaches, adjust to different strategies and plans, shift industries, be ready for rebranding, or even start all over again. Teammates able to recover together also possess the trait of effectively working together through hard times.

Conclusion

Failures do happen. However, starting your startup, you may always take into account the bad experience of other companies and consider the success stories of the best startups.

If you want to succeed, you must know, not hope that your startup will achieve your goals and get success. In addition, remember that there is always a chance to succeed if only work harder and smarter than your competition.

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