Monday, 18 April 2016

Why start-ups fail in general?




It starts with the dream, the compelling aspiration of accomplishment. The passion to do something on your own. An envision of being your own boss and large checks at the end of the day. The reality is, however, harsh. It is estimated that 9 out of 10 startups fail. A statistic that a would-be entrepreneur or investor should mark distinctly in their mind. The autopsies of the businesses that failed should be imprinted in their focus. Not to discourage their foray, but a caution to be wise, astute and shrewd as they step into an unpredictable venture.
The passion is there as well as the devotion. But it takes much more than an ardent interest in an idea to be successful. Every year, umpteen businesses are started with nothing more than the entrepreneur’s interest in a particular area. 

Converting that passion into a product or service, marketing, addressing customer concerns, sustaining the growth, revenue production are all distinct tasks which requires acute business acumen. There is a need to be consistently good in tasks across the spectrum of a business, deficit of any would adversely affect the start-up.

The postmortem of many of the floundered businesses point to the simple fact that most startups aren’t built on the foundation of viability. From the initial phase of startups which is deciding on the focus of the business, to the second stage of development there is a long and tough path to trudge. The second stage may require less of creativity and ingenuity, but it calls for meticulous execution of various activities. Lack of experience, skills, or insufficient funding are the major stumbling blocks in this stage of the start-ups.

Start up owners find it easier to raise capital than to continuously sustain the flow of cash. How much ever initial cash you raise, without revenue generation, investors will stop knocking at your door and you will eventually run out of cash. Ventures spend money on products without allocating the needed for sales and marketing which ultimately affect the returns. Many startups run out of cash because of their budgeting errors, poor product management, over-hiring, their burn rate is too high, bad accounting or some combination thereof.
The markets may fluctuate, products may fail or take off and ideas may flame or simmer, it is the fickle nature of business. But what holds the company together and take it forward day after day is the team that forms it. Selecting a group of smart people, a team of strangers who will learn to work together is a cardinal element to the longevity and productivity of the company. The performances of employees should be evaluated and competency rewarded. At the same time, you should remember that carrying dead weight with less
competent people will do serious damage to the company’s prospects. It is also important that the company has the right management team to attract, inspire and retain the employees.

Finally and most importantly, companies must develop a product that meets the market need, at the right price, at the right time. From simple execution flaw to not being to achieve product/market fit, the reasons for product failure can be many. Understanding the target market and moulding the product according to them are essential for successful businesses. Your product should attract your customers. It should surprise them , satisfy them and give them much more than they expected. Not being able to build according to the customers fancy can be a recipe for failure.

With high risks come higher rewards. Startups with all its uncertainties, reap rich benefits when succeeded. From the moment the seed of business is planted, the entrepreneurs must exactly know what they should do at each and every step going forward. In todays volatile world of entrepreneurism, an exit strategy is a must which will help you capitalise on your hard work even when the business fails. If your startup fails, a clear post mortem analysis will point you in the right direction next time. There will always be a next time. And at that point, proper planning, business acumen and dedicated hard work will carry forward your business to the high rungs of desired triumph.