Unstructured Business Model
One of the most common reasons of failure of a startup company is that the entrepreneurs are too much optimistic about their business model. They think that as they have built an interesting website, product, or service, so customers will come running to them. It may happen for the first few customers, but after that, it becomes alaborious and expensive task to attract more customers, and in many cases, it can be seen that the cost of acquiring the customer (CAC) is much higher than the lifetime value of that customer (LTV).
This is the major reason why startup businesses fail is that they run their business into the region with little or no market for the product what that they have built. Some symptoms of no market are:
Lack of value proposition or compelling eventforcing the buyer to commit purchasing
Wrong market timing is another symptom of no market. It may be the fact that the product and services you are offering is not suitable for the people at this stage. Its reason may be that you are ahead of your market by a few years.
Poor Management Team/ Strategy management
Weak management team and lack of effort in strategic management is a common reason which leads a startup to failure. A good management team will be smart enough to avoid any reason leading the company in failure. Weak management teams make mistakes in multiple areas taking from business idea to idea implementation.
Low on Cash
Many startups fail because they run out of cash after some time of starting the company. Thus CEO of the company must understand how much cash is required and how much is left to make the cash flow positive. All planning must have been done in the early stage of the business startup.
Another reason which leads a companyin failure is that they develop a product or service that rarely meets the market need. This problem can be a result of either due to modest execution or it can be due to a problem in strategic planning.
Most of the time the first product that a startup brings to market won’t meet the market need. In the best cases, it will take a few revisions to get the product/market fit right. In the worst cases, the product will be a waste and of no use in the market and requires a complete re-think.
Expanding too early:
It is a normal thought which a business owner thinks after getting “early day success”. They start thinking of expansion in context of their new office, factory, warehouse, geographical location, or some other superfluous area. This costs an additional surplus for the company rather than to work in favor of them most of the times.
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