Why startups fail

Many startups fail because they build a product without doing proper market research.

This can range from not getting the product right to not marketing it properly in terms of price position and competition.

It may also just be that the timing of the product launch is wrong with the market not quite being ready for your product.

Your market size could just be too small, which means you simply won’t make the revenue.

Legal mistakes

From neglecting the basics to the business structure there are numerous legal pitfalls for startups in the UK.

Crestlegal.com provides commercial legal services for businesses in the UK. They stress the importance of getting the right contracts and documents in place from the outset as well as seeking impartial legal advice.

A big factor that people often neglect is partnerships. There is a difference between trusting the people you were going into business with at the start of a project, compared with a few months or even years in. 

Boardroom disputes happen and things can escalate quickly, so having the right partnership agreements in place is essential from the start of the venture.

Businesses also need legal advice on structuring and setting up a business as well as common issues such as

  • Protecting your personal assets as well as the know how and ideas 
  • Legal documentation for hiring employees and creating the relevant contracts 
  • Getting funding
  • Creating business to business contracts with suppliers

There may also be legal issues with developing an idea or product. This might include legal challenges from bigger businesses who see you as competition.

Business model

The business model you choose allows you to to find a scalable way to get new customers and also to monetize customers that are existing.

Customers have a lifetime value and the cost of acquiring them must be significantly lower than their lifetime value.

The managers and founders

Common problem causing startups to fail is the strength of the management team and founding members. A weak management team can lead to a poor culture and also poor strategy going forward.

Partners and founders may also fall out or want to take the business in a different direction.

Cash flow problems

This one is kind of a biggy. Reducing expenses at the start of the Venture as much as possible can really help with cash flow, however raising cash is a big challenge for startups.

Finding the right investors and deciding on who they are and the amount that you need is a big factor in raising cash for a startups. Disharmony amongst investors could mean the money is pulled out or the investment withdrawn.

Marketing

Some call it witchcraft or some call it a vital part of your strategy. Leaving your marketing to the wrong people or investing the wrong amount can have a dramatic impact on the growth of your business. Marketing also plays a pivotal role in getting to know your audience and how to get there and attention. Ultimately marketing helps you grow your customer base.

According to growthgorilla.co.uk brand awareness plays a pivotal role in building trust in your brand positioning you as an expert and encouraging word of mouth.

For the top 20 reasons startups fail, see cbinsights.com.

Leave a Reply

Your email address will not be published.