Why 90% of Startups Fail and How to Avoid It



Startups have brought a great change in the life of people, their lifestyles, and their reach to the world, standards of living, etc. they have been a major part contributing to the economies of the countries not individually but as a whole. Technology has brought a drastic change in our lives. It has brought changes in the way we live. A person cannot even think of his life without the internet. These changes have been adopted rapidly leading to growth and better innovations day by day.

With the increase in a number of startups in recent times, it is seen that 90% of startups fail. The question that arises is why only one out of the 10 startups succeeds? What factors lead to failure of the majority of startups?

Here is the answer about why 90% startups fail. And let us also find out solutions for how can this are avoided. The following factors are some of the reasons why 90% of startups fail:

      1. No market need

        This is the major reason for the failure of most of the startups. A startup succeeds only when it is able to solve the needs of the consumers. Thus, with a huge emergence of startups, many of them provide services for which there is no demand in the market. The startups fail to realize the need of the target market. When the people of the market do not require those services, they will not spend a penny on it and thus the startups fail. It is, therefore, necessary to first analyse the demand of the target market and then work towards it.

      2. No funds

        Startups do fail because of lack of availability of funds. A startup might not be receiving the appropriate amount of funds or might be overspending for its expenses. Thus this is another reason why startups fail. Unless a startup has the appropriate amount of funds, it will not be able to carry out its operations effectively. Suppose a startup needs to employ people in their firm, they might not have enough funds to pay the salaries and thus fail to employ more people. Another possibility that arises due to a shortage of funds is that the firm might be paying less to its employees due to which the employee does not give his best in the firm. Thus, it is very important for a startup to have enough amounts of funds to carry out smooth operations and success in the market.

      3. Does not have the right team

        To achieve an objective, all the members of a firm have to work as a team towards a common objective. Unless there is a good team work, a startup cannot succeed. The team might lack motivation due to which it is not able to give its best. A common vision and motivation are vital for a startup to succeed. Another important factor towards having the right team is to have expertise members. Here the startups fail to ensure these 3 factors while making the right team achieve its objectives. Thus, a startup can succeed only if it has a team of experts who have received continuous motivation and work towards a specific goal to be achieved. 90% of the startups fail to do so.

      4. Get outcompeted

        A startup can compete with its competitor firms only when it is able to have a good team of experts, appropriate amount of funds and a proper combination of detail. Unless the firm competes with others in all these terms, it cannot succeed. Most of the startups even fail to stand in the competition due to lack of essential factors required.

      5. Pricing issues

        Now, even if the startup gets established properly, it might not succeed in the market due to high prices of its products. A startup may be providing demanded services in the market. It may have a wide variety of products that helps its target market choose the one that they like the most. It may provide quality services to its customers, but may charge high. It will lead to consumers’ resistance towards the products. A firm’s underperformance in sales and revenue leads to its failure. Most of the startups fail to perform well in its sales and revenue leading to its failure in the market.

      6. Poor product

        Another reason of the failure of a startup might be its failure to provide the right quality of the product. Even if the startup ensures to provide the product at a right price and is providing something that is highly demanded in the market, it may fail to provide quality. Consumers might be disappointed with the goods and services it provides ultimately leading to failure of the firm. It is vital for a startup to have its primary focus on the product. If it fails to do so, it will lead to disappointing end results for the user.

      7. No business model

        Only having an idea for the business is not enough. A business needs to have a proper model, it monetization strategy and the entire working strategy planned initially. 90% of the firms fail to do so. They fail to build up a proper business model. Without a business model, the firm won’t be able to use funds at most appropriate places. It won’t be able to create appropriate strategies for its sales and production. A business model is basically a success plan for a business.

      8. Poor marketing

        Many marketers think that their product is so great that it can market itself. Hence they fail to make efforts to market the products as required. This leads to wrong marketing to the wrong target market leading to reducing the value of the product. Unless the marketing is effectively done for the product produced by the firm, it cannot succeed in the high competitive market. Many startups even fail to promote its awareness in the target market.

      9. Ignore customers

        The consumer is the kingpin of a business. Without customers, no business can survive for long in the market. Unless the consumers are provided satisfaction with their product or service, a business cannot make money. Consumer satisfaction and loyalty is one of the important factors that a business needs to take care for its success. Many startups concentrate only on its revenue rather than concentrating on consumer satisfaction. Consumer satisfaction is an important term to note as one can earn profits only from its consumers. Suppose a customer buys your product and does not seem to be satisfied, he will have a negative impact on the firm. Also, he will make others aware of this usage and failure of providing of utility by the product. On the other hand, if a business is able to satisfy the consumer with its products and services, he will surely come back again for his next buy. Also, he will tell others in the society about the lovely product the firm provides. This further helps the business to get more consumers along with retaining old customers. More the number of customers a business has, more is its sales and higher the revenue. Many startups simply ignore the consumer satisfaction resulting in its failure in the market.

      10. Mis-timing of product

        Launching a product too fast or too slow leads to failure of a business. Many startups fail to launch products at the correct timings. This can be explained with an example. Suppose a startup is involved in producing ACs. It produces or launches them in the winters; the product will have no demand. On the other hand, if it would have launched them in the summers, there would have been a great demand. Taking another example of a mobile phone, if the new product of a series is launched very fast, it might not be demanded. Also, if it is launched late in the market, people might have switched over to some other brand. Thus, proper timing for the launch of the product is very important which most of the startups fail to do. This leads to their failure.

      11. No focus

        Even if the startup thinks of working in a particular sector, with changing visions and innovations, it may end up producing something else. It is important to have focused on the vision of the business. It is also important to work at a specific goal rather than changing the goals with changing ideas. The purpose behind the production of a product should remain the same.

      12. Wong Location factors

        A startup needs to identify its target market and set up its production in the same market. The choice of location by many startups is not appropriate. They may produce products where the product is not at all demanded. Locating your firm at the right place and serving the right customers can only lead to a success of the business.

      13. Legal problems

        There may be many legal issues arising on set up of a startup. Thus a start needs to overcome these legal challenges. This is another key area where most of the startups fail to comply with the legal rules and conditions. These issues arise in the different field of different markets and hence needs to be resolved by the business firm.

      14. No financing or investor interest

        Being on a smaller scale, the startup might not find investors willing to invest in the firm. Being a smaller size firm, they investors might not show their interest. This leads to lack of funds and hence the failure of the startup.

      15. Failure to pivot

        If a person makes a mistake, he can rectify it only if he accepts it. Many startups initially do make mistakes. It is obvious that they cannot go right all the time. But what they fail to do is to accept the mistake and further work on it. One the firm does not accept its mistake; it again makes the same mistake leading to failure. These mistakes might be the excessive price charged by the company, disappointing the employees with overburdened work or low salaries. Thus when a startup disappoints its customers and employees, it cannot survive long in the market.
        Looking at the above factors, we understand what most of the startups fail to do and hence aren’t able to survive for a long term in the market. Only 10% of them are able to concentrate on the above factors and work effectively leading to success in the market.

      HOW TO AVOID THE FAILURE OF STARTUPS

      Now, the following points will help you understand how the startups can avoid these limitations and work towards being successful in the market:

        1. Idea

          Firstly, know the idea behind your startup. Unless you are sure about what kind of business you want to pursue, you cannot make further strategies for its success. Thus it is firstly important to have an idea in your mind about the startup. The idea should be about what startup you want to have and what services will it provide to its consumers. You should be able to analyse the competition factors in the market and think of a derivative idea accordingly. Also have an idea of the demand factors in the market. A thorough research will be able to help you create a better idea.

        2. Planning

          Once you have an idea in your mind, you need to plan on how to work on the same. You need to plan out various factors like your target market, monetary budgets, and decisions. All the key areas of the business should be well planned.

        3. Have a good leadership

          Make sure you are choosing the right person as your partner. The leadership qualities should include the following:

          • You should have mentors.
          • There should be harmony among the investors and co-founders.
          • Do not be reluctant. Work for the organization and its success.
          • Make efforts of doing the work rather than simply thinking
          • Your efforts should show your enthusiasm towards the organizational goals
          • Do not be egoistic.
          • Flexibility, attentiveness, passion, good advising, liveliness are some more qualities that a leader should possess.

        4. Financial management

          The startup should have a proper financial management team to reduce its possibilities of failure due to monetary reasons. Starting off a business with financial backing is wrong. Identify the correct resources for financing and always keep track of it.

        5. Human resource management

          Although it is known that consumer is the kingpin of a business, but so it the employee of the firm. The team should make sure that they employee an appropriate human resource for their organization. They should firstly analyse the team requirements and finalize the human resources accordingly. Having a good human resource management helps you choose an appropriate team. Motivation, salaries, training is some of the important factors that when done in the right way will fetch you the organization’s success.

        6. Product launch

          Launching a product involves two aspects. A product first should be launched at the right time and secondly at the right locations. Unless the product is launched at the right time and location, there is no use of the producing products having no demand. It is said ‘stitch in time saves nine’. It is essential to analyse the timing of the launch of the product depending upon the demand factors. Also, the startups location should congregate with its concept. Then only the startup can assure its success.

        7. Marketing

          Poor marketing will make it hard for the startup to beat its competitors. The ingredients of marketing should be properly arranged. The advertising strategies, marketing strategies should be adopted for creating awareness and more sales in the target market. A smart market makes the consumers feel smart. It also helps the marketers to understand the expectations of the consumer and helps them fulfil it.

        8. Sales

          This is where the business of the startup has to ultimately reach for its success. A startup needs to ensure proper sales strategies like the pricing factors, availability of products, etc. sale is a part of the business where you make long-term relationships with the customers. A startup can succeed when it has ensured availability of quality products whenever demanded at affordable rates. The best sales can be generated only with creative thinking to compete with your competitors.

        9. Management of the operations

          This factor includes the proper management of the operations of the business to avoid operational failure. An operational failure leads to the overall failure of the startup. Management of operations should be in terms of:

          • focusing on demands rather than only on profits,
          • proving quality producing,
          • accepting consumer feedbacks and working towards them
          • admitting the legal hurdles and complying with the rules and regulations
          • Proper allocation of human resources as per their work and qualifications
          • Proper allocation of funds
          • having a good business model

          With the emergence of the internet, the startups should also ensure their availability over the internet to ensure its reach to wide customers. Its online presence will also lead to various benefits and opportunities.

    Thailand Perspective

    Startups have seen to change the entire system of business. With an immense use of technology, they have brought the economy of Thailand to greater heights. They have changed the culture of the working of companies. But these entrepreneurs, in the long run, have seemed to be unsuccessful in carrying out their businesses. There are various factors why most of the startups in Thailand have failed.

    One of the major reasons for the failure of Thailand startups is the competition. With a high level of competition in the market, the startups in Thailand fail to do the marketing of their business at the same level. They have failed to provide consumer satisfaction by ignoring the perspective of customers. But the success of a startup does not end here. If these startups focus on the above aspects while starting their business, they can gain huge success leading to the development of their business as well as the economy of Thailand.

    Success of Thailand Startups

    Various IT companies in Thailand are providing their services at global levels. Large outsourcing services provide professional services to their clients like web development, application development, software support, and other IT enabled services. They have succeeded in providing cooling equipment with best international services and specifications. Startups in Thailand have enabled the economy to trade with foreign countries thus leading to the success of the economy.

Contact the Startup Specialists in Thailand to get an insightful idea on how to start up a business with minimum risk and investments.

Request a FREE Online Consultation or get essential tips by downloading this e-Book  on how to Startup in Thailand.

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Andy Aditya

As Business Startup Specialist, Andy is often hired as a Virtual Director/Consultant to assist Business Owners in Thailand. For total business information and consulting for doing business in Thailand - Pls check - startupinthailand.com
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