How to Determine Why Your Startup is Failing

Startup failing

The age-old adage that “90% of startups fail in their first year” is like a scary mantra every entrepreneur repeats. But that’s not necessarily a bad thing. So many successful business owners failed in numerous endeavours and those served as great business lessons. Still, we will admit it hurts to be defeated.

So, is there a way to anticipate the crash? Can you see the signs before it all takes a turn for the worse, and save your business? Well, we believe so. And that is why we’re sharing eight of the possibilities why your startup might be failing, and how to spot it.

1.      Start with Yourself

When in their first months and up to two years, startups rely on one energy source: you. If you’re a one-person show, of course your outreach and brand will depend on how much of yourself you invest.

However, when managing a small team, they will be looking to you for guidance and motivation. If you find yourself emotionally drained, exhausted and just not as invested, it should be a big red flag.

2.      Analyse Your Teams

Similar to the first point, look at your employees. How much do they bring to the table? Are they passionate about the project? Do they give their best to see the business flourish? If all the answers seem to be a resounding “no”, it’s time for a pep talk. Find out what’s troubling them, and see how you can help.

3.      Look at Your Target Audience

target audience

Oftentimes, startups make the mistake of not investing enough time to research their target audience. When you’re selling your product or services to the wrong customers, the numbers will show it. Run an online questionnaire, or engage your customers on social media. It should give you an idea if you’ve been playing the wrong field the whole time.

4.      You Grew Too Fast

A staggering number of startups was proven to have failed because they grew too soon. Drunk on initial success, owners tend to hire larger teams, start new projects and expand their customers before the business is ready. It’s time for a scale-up when:

  • you see new customers flowing in every day for a longer period of time;
  • you know the cost of acquiring new customers and
  • you have a solid business model that gets you customers in the same way.

Not having any (or all) of these three points is a sure-fire signal you’re scaling up too soon.

5.      Your Business Planning Takes Too Long

Forget developing marketing plans for months, only to watch them crash and burn the moment you put them out. It’s all about trial and error, so sit down with your team, draw up a plan on a business model in a few days and test it. If your marketing efforts aren’t drawing in new customers, that’s time wasted, and another red flag.

6.      Check Your Finances

Not having a solid accountant is another recipe for disaster. It’s easy to start bleeding money in places you didn’t expect. This only gives way to panic and poor decisions. What you need is to have an accountant go over your budget and expenses for possible holes in the system.

7.      Lack of Focus

If you’re doing the best you can to network, pitch your business to partners and bigger companies, attend conferences… then you’re already making a big mistake. The first year of startups is all about surviving.

Being a business owner is much better for your company than playing the role of one. Focus on the product, on day-to-day fires that need to be put out. Otherwise, your company will start to fall apart while you’re out having coffee at the latest entrepreneurial conference.

8.      You’re a One-Person Team

This one is fairly easy to spot. No startup can grow fast enough if you work alone. While it is a cheaper, more secure option (for those who are distrustful of other at first), and good for beginners, it takes much longer for solo business owners to get their product off the ground.

Unless you are a startup prodigy, things will start to slip out of your hands, and cause major mishaps in your marketing, finances, or menial everyday tasks.

To Sum Up

This list showed just some of the reasons why your startup could be failing, and where to look. However, different businesses will have different problems. The safest course of action, as we said, would be to start from yourself. Then, move down the hierarchy, step by step. Analyse every viable aspect of the company.

Once you find the problem, see how bad it is, and how much effort it will take to fix. There’s always the option of throwing in the towel. But even ailing businesses have a chance of recuperating. It all comes down to how fast you can locate the problem.

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