A substantial majority of small start-ups fail after a short amount of time.  In the first five years of their existence, around half of all businesses fail. Only 20% of businesses can endure for more than a year after they are founded, according to the figures.  The reasons for this failure are frequently attributed to the owners’ lack of experience, as well as lack of management and marketing tactics.

While economic advisors point out that there are other reasons that have an unanticipated impact on a project’s chances of success, the most common reasons start-ups fail will be presented below:

Reasons Why Start-ups Fail

Imitating blindly

Making quick decisions and jumping right into practical steps and implementation that have not been thoroughly researched is blind imitation. Blind imitation of existing projects doesn’t take into account the feasibility of their material value and profit returns, their usefulness, and need for society.

Insufficient data

To create an effective marketing plan, you’ll need marketing knowledge of your target consumer and competitors. Often, the owner of a small project is unaware of the significance of these elements and may choose to ignore them. Lack of sufficient information to turn a concept and vision into a successful project that can thrive is not uncommon.  However, when an owner launches their business based on intuition, guessing, and improvisation, this makes their success a game of chance.

Capital deficits

 The project’s minimal funding limits its working space, which may lower its prospects of success. However, most people are unaware that extra capital frequently has a negative impact.

How is that so? Well, when a project’s money is substantial, the owners of small projects prefer to spend it all over the place, focusing on minor details and looks (luxury offices, for example) rather than the primary concerns and goal: the project’s success.

Insufficient liquidity to continue

Money, no matter how modest, is the lifeblood of any business or commercial activity. Without a sufficient amount, continuing will not be possible.

Failure to separate between project and personal resources

Financial management that is based on solid foundations is required for a successful project. Small business owners and entrepreneurs frequently mix up personal and project resources, failing to separate personal and project spending. As a result, financial and accounting mismanagement causes the failure of small businesses.

Relying on friends and relatives

How you choose your team determines whether the project succeeds or fails. Employing friends and relatives without considering their skills and expertise causes small and medium-sized businesses to fail. While this is not always the case, it should be considered.

Neglecting to conduct a marketing feasibility study

Any project’s marketing component is critical to its success. Marketing is a science and an artform whose importance has recently begun to emerge in our industry. Marketing is built on understanding the aspirations and needs of the market segment we want to service. Research marketing opportunities ahead of time, and then meet those demands. Neglecting the marketing side of a project has now become another factor for its failure.

Lack of clear vision

Long-term strategies for business growth and development can be done through the exploration and evaluation of prospects and alternatives. However, these are often lacking. This lack of vision can hinder the business’ success. 

Pride in the first success

Because many modest ventures were successful, their owners thought that the situation would continue. This results in stagnation, passivity, neglect, and arrogance. We live in a period when the market and customer tastes change rapidly. A powerful competitor may emerge who offers superior services and prices, with a clear outcome in this situation.

Excessive optimism

When signs of project failure appear, the owners insist on continuing. Often the reason is optimism about a future opportunity. Or emergency market conditions that will change quickly. 

Based on confirmed information, which leads to the continued exhaustion of his financial resources.

Failure to Comprehend Customer Behaviour and Desires

For years, one of the most popular expressions used in large and small enterprises was “the customer is always right”. That slogan is more accurate today than it has ever been, and should be the credo of every project that aspires to be successful.

There are several electronic platforms through which customers can complain and reach large numbers of people with the press of a button. This can have a significant impact on the project’s sales and reputation.

Customers can now complain about a variety of reasons, not just the quality of services or items given. Even at the smallest stores, some customers expect to pay with their credit cards. If it is not available, some of them may protest. Not to mention, some may give the project a one-star rating on review sites.

As a small business owner or a start-up company, you must have a thorough understanding of your customers’ behaviour and aspirations. You need to provide them with the greatest possible experience and, in turn, receive praise and good feedback that leads to more customers and sales.

How to Provide Your Customers With a Great Experience?

  • Ensure to conduct the customer feedback surveys via the project’s electronic channels as well as your store or organization.
  • Consumers trust Google and Trustpilot reviews more than 85% of the time, so make sure yours are positive.
  • Make it simple for people to contact you by providing several communication channels and a short response time. A late answer not only results in the loss of a customer, but also in a negative evaluation and complaint. This leads to the loss of many potential consumers.
  • If it is within acceptable limits, make sure to provide everything that customers request, whether it is related to the products themselves or the project’s mechanism.

Conclusion: Why Start-Ups Fail

These were the reasons for the failure of many start-ups; knowing them may help you avoid making typical, seemingly innocuous mistakes. For some,  failure in its early stages can serve as a motivator for achievement, further learning, drive, and perseverance.  Pay close attention to all the aspects of your work and project, both small and huge. Use your weapon of continued learning, persistence, and relentless work to conquer all hurdles and challenges, no matter how difficult they may be.

About the author

EWOR is a school conceived by Europe’s top professors, entrepreneurs, and industry leaders. We educate and mentor young innovators to launch successful businesses.

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