Why Most Startups Fail

by | Jun 28, 2022

If you have a great idea for a startup and have always wanted to try your hand at owning and running a business, then you’re probably aware that failure isn’t just possible — it’s common. In fact, 70% of businesses fail within their first decade of operation. But while launching a startup can be risky, it can also be very rewarding. That’s why you want to avoid these common pitfalls before starting your small business journey. 

woman flipping sign in business window to show open

Poor Planning 

Arguably the basis for nearly all startup failure, poor planning before the inception of a business can certainly ruin your future prospects — even if the startup idea is great. Before the business name is even trademarked, some issues aren’t thoroughly examined and can result in tragedy down the line. In fact, 25.5% of failed businesses cite lacking a business plan or model as a primary factor in their collapse. 

That’s why carefully planning out and researching major business functions before you commit to a startup are a must. 

Before launching your startup, take the time to: 

  • Consult with a legal expert on regulations, restrictions, and requirements 
  • Create a basic map or plan of the daily functions and necessities of the business 
  • Consult with an accountant on the basic financial buy-in and planning required for a startup of your desired size 
  • Project the resources necessary for sustainable progress and growth within the business 
  • Consult with an expert in the industry you hope to enter 
  • Research market projections about the competition and opportunities within your desired industry  

More planning beyond this will be necessary, but it will depend on your industry, startup size, and business model. 

Too Few Resources 

It’s sad to admit, but no matter how good an idea is, it simply cannot get off the ground without capital. That’s why “running out of money” is the #1 contributor to business failure at 37%. The reality is that launching a great product or service requires buy-in from either yourself or investors, even on a small scale. So, ensure you have the proper resources available before moving forward with your idea. 

Too Much Competition Or A Lack Of Need

You might be great at something. Heck, you might even be the best in the world! But sometimes a market is too competitive or limited for a new entrepreneur to enter. That’s why you need to research how promising a market is before diving in. 

One great way to start is by asking your friends and family if they would use your product, or if they know somebody who would. Lots of startups begin with an entrepreneur marketing to their close friends and family in order to perfect their business model and production process. Then they are better prepared to deal with the realities of their chosen market before doing a hard launch

Launching a startup can be rewarding if you carefully plan, research, and fund your venture before embarking on the journey. This planning will set you up for the highest probability of success and allow you to learn along the way.

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