Top 6 Reasons Why Startups Fail and How to Avoid These Mistakes
Almost half of all startups in the UK fail within the first five years, but you shouldn't let that put you off. The UK startup industry grew 4.6 percent in 2015 to 608,100, which shows confidence in the entrepreneurial sector. So if you get some of the fundamental elements right, you could be enjoying the fruits of being your own boss quicker than you think. Here are some of the biggest reasons startups fail and how to make sure you don't fall into the same trap.
1. There’s no market need
The first thing you need to think about when you are starting up your own business is 'is there a need?' So, is your product new and innovative? Does it have a niche? Is it unavailable in your region or area? Will people want or require it? Thinking unemotionally about the goods or service you want to sell is critical. Many small startups fail at this first hurdle by being so wrapped up in what they think people want, without researching adequately and finding out if there's a market for it.
2. Failure to create a good business plan
A good business plan is essential to the success of any business. It is basically a roadmap that details your goals and how you are going to achieve them. And like a map, you'll quickly get lost without one. Elements of a good business plan include analysis of your products or services, customers, competitors, management team, strategy and implementation, as well as detailing profit and loss projections, sales and cash flow forecasts. Not only will this help you to see where you're going and know how to achieve it, but if you're looking for investment from banks or other lenders, you won't get any finance without one. Don't panic though – there are plenty of online resources to help you if you've never done one before.
3. Lack of money
This is a big one. Too many startups sink because they run out of money. This is also why a comprehensive business plan is so important. Before you start, you need to do a thorough assessment of every cost involved in starting up and maintaining your business for at least a year. That includes stock, rent, interest on loans, power bills, marketing, wages and more. Don't try to wing it or expect to scrape by – and remember, you need money to live on too.
4. Poor product or service
You might have a great idea and it might be something that the market needs or wants, but if it is poorly executed, then your business will quickly develop a reputation for substandard service or bad products. If you're in the service industry than this means getting the right staff with the right training, the right equipment, products and the right attitude. If it's a product, you need to make sure it's well-made, meets safety standards, you have enough of it and your delivery system is up to scratch. Cutting corners will only damage your brand and your business and drive you to failure.
5. Marketing mistakes
Failure to do marketing is a big no-no and making sure you have a targeted, marketing plan with plenty of appeal is an absolute must-have for a startup. People can't find your business or product if they don't know about it. If you're in the service industry, just opening your doors and putting out some signs isn't enough. You need a structured well thought-out plan that harnesses social and traditional media, factors in promotion before you open and considers special deals to keep people talking and coming back.
6. Settling in to the wrong location
Location, location, location is what they say and it still holds true. You can have the best retail outlet going but if it's not in the right place, you're going to lose out. For restaurants and cafes, you need to look at the demographics of a location, the foot traffic and if any of your successful competitors operate nearby. Take your time to find the right spot and do your research.
When all is said and done and your startup becomes a 'stay-up' , you'll be glad of the groundwork and research you put in at the beginning.