Why do so many startup businesses fail? (the elephant in the room)

Lots of startups fail. The figures are bad. The reasons are many. Interestingly, you can often spot the potential failures a mile off too, often before they even get going. But why do so many startup businesses fail? Back in the day, the narrative was often shrouded in business talk and jargon. However, the reason so many startup businesses fail is rarely because of a poor mission statement, it’s hardly ever because of a businesses core values and it’s unlikely to be because of inaccurate five year targets.

Thankfully, nowadays, the reasons given as to why so many startup businesses fail are much more real:

• Creating a product/service nobody wants
• Lack of planning/research
• Wrong market, bad positioning
• Bad timing
• Having a poor business model
• Poor leadership, bad hires
• Cashflow problems
• Poor financial management – lack of bootstrapping 
• Poor website and online strategy
• Ineffective marketing/advertising
• Lack of passion and interest in the business
• Not being agile
• Over-expansion – expanding/scaling too fast, too soon, too much
• Failing to actually deliver what you claim your business does
• Bad luck (such as the recent pandemic)

However, you can still fail even if you address that stuff, and that’s because it leaves the elephant in the room – you. 

The reason why so many startup businesses fail is often due to things that those nearest and dearest would never dare tell you: “Don’t even think about remortgaging the house for this business idea. No one will want a Smart Toilet Seat that reads text messages when you sit on it, and especially not from someone as irritating as you!”

It’s hard not to confuse being positive, being a go-getter, being enthusiastic, having a glass half-full attitude, etc. with the reality of who you are, but there is no room for sticking your head in the sand in business, particularly if you are spending your life-savings on that business.

So lets have a look at a few reasons your business may be struggling… things that may touch a nerve, but hopefully will help you get real. Some of these points are a bit random, but you’ll hopefully get the point – the aim here is to get you thinking beyond the traditional stuff:

• Did you ask friends and family about your product/service – they said it’s fantastic, but once launched no one is buying it? Hmm.
• Were you new to business and unsure how to get started, so the plan was to just throw your inheritance at the business and hope it turned out well?
• Do you get frustrated and angry as to why people don’t buy your product/service – rather than trying to work out what the problem is and then solve it?
• In your desperation to get started, did you sign a lease on a property for a restaurant/shop that is two blocks away from the high street, hoping that people will stumble across it? 
• Have you rushed into buying expensive equipment, or signed up a business/warehouse lease prematurely, and are now tied in?
• Do you feel you don’t actually have a problem, and the problem is everyone else? “Those b@stards! Why are they buying from them when they should be buying from me!!”
• Are you avoiding getting stuck into selling, and just playing at it rather than sending those emails and making those calls?
• Are you keeping your business idea secret so that no one steals it?
• Do you avoid the ‘numbers’ and play dumb, blaming your accountant? If so, you need to read our Make sure you understand your business accounts article.
• Are you unsure about setting your pricing, so just keep lowering your prices thinking that will help?
• Have you taken early investment and given too much equity away, leaving nothing left to play with?
• Do you stick your head in the sand when it comes to your poor performing website and lacklustre online presence?
• Do you celebrate having about a sale, when in reality it’s nothing more than a vague lead?
• Do you secretly not even believe in yourself or your product/service?
• Are you genuinely interested in, and passionate about your business? Or have you lost your passion in it? Read more on Passion and interest – the key to business success.
• Do you hate negative feedback and thus avoid putting yourself out there?
• Are you more of an ‘inventor’ and lack business experience and skills?
• Is it your way or the highway?
• Are you difficult to work with?
• Are you fooling yourself that things are working because you get social media ‘likes’?
• Are you struggling with certain areas (for example, selling), but not addressing it?

These examples are just the tip of the iceberg, and there is a huge cross-over with all the other important points mentioned earlier in this post. However, the point is that a lot of business success or failure, comes down to the founder’s personality, their passions, the type of person they are, and their previous experience in work/life/business.

The good news is that even though the question, ‘why do so many startup businesses fail’, is a common one, there are things you can do to try and avoid being one of them. How? By being true to yourself – start a business that you’re passionate about; by getting real and facing the real problems; getting help in to handle the areas where you lack experience/expertise and by tackling the elephant in the room. If you don’t know what the problem is, ask someone experienced who will be upfront with you. Be prepared to face some home truths. Once you do that, you can quickly move forward and hopefully turn your idea into a successful business.