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WHY SMALL BUSINESSES FAIL: 7 COMMON REASONS FOR STARTUP FAILURE

Marketing Manager
Anastasia Shevchuk

INTRODUCTION

Before launching a startup, it is wise to think twice. The rate of failed startups is very high.

Identify your business and ask yourself: what is your business about? What is your value proposition? Who are your customers? What customer's pain are you going to heal?

Having a good idea in mind is perfect but not enough. Launching a successful startup requires conducting thorough market research, identifying a target audience, hiring an expert development team, and many other steps that most startups successfully skip.

Finding out the real reasons for failing in each case is not easy but let's consider the most common ones.
startup depression

REASON 1. NO BUSINESS PLAN

Many startups won't plan for the future because they feel like their idea for a product or service is enough to gain success. While having a great idea should help you in the early stages of forming a startup, you need to combine this product with a comprehensive business plan if you want sustained success.

A lack of planning means that you'll be required to make decisions about marketing strategies and product direction on an almost daily basis, which can be frustrating and time-consuming.It's also very difficult to avoid distractions when you don't know what you're working towards.

While creating a business plan might seem to be a difficult task, it will allow you to have a road map that you can reference in the years to come. This business plan should take your marketing strategies into account as well.

REASON 2. HIRING THE WRONG PEOPLE

If you're an entrepreneur who believes in your product/service and has a good idea of what it will take to create a successful business, you likely understand that you'll need to hire employees throughout the process if you want your business to grow properly. However, many startups hire the wrong people who aren't right for the job.

For instance, some startups focus on hiring their friends for jobs who may not have the necessary expertise. In the formative stages of your startup, it's imperative to hire people suitable for the job. If you hire the right people, you'll find your company functioning properly.

If you've never hired employees before, some general hiring tips will make this process go much smoother and minimize mistakes in the hiring process.

For instance, ask every potential employee about why they want to work at your company and how they would tackle common problems that occur in a standard workday.

Don't forget about soft skills. If the job that you're hiring for requires a regular conversation with other employees, management, and potential investors, you should hire someone with good social skills and an outgoing personality. Likely the best method to simplify the hiring process is to have a proper HR team within your startup. When you hire an HR team for your startup, they'll be able to handle the finding, recruiting, and training of all applicants, which will make your job easier.

REASON 3. NO MARKET NEED

The reason many startups do not succeed at the very beginning is thinking that market research and communication with customers are not required.

Market research determines the size and trends of the potential target market, provides the team with information about the competition and user needs.

Communication with potential users are a valuable source of information when it comes to designing the product and tuning it. On the stage of initial solution building and development, it gives the product user's profile.

It tells who they are, all about their age, marital status, habits and experience, conditions under which they may apply the solution you offered them.

Knowing all the details about prospective customers allows you to define what your product will look like, for which platform it should be developed, which colors and special features should be implemented.

Even more, market analytics is a great tool for making sure your project can compete.
To be competitive, a product must be functional and user-friendly. If it is harder to use than the one competitors offer, no matter how you care for the user and how unique the product you offer is, you are out of the competition.

Research results will help you to understand if your product is convenient enough and lives up to the user's expectations in every way it must.

After all, the user is the one who defines your success.

Here's a comprehensive guide onhow to achieve a product-market fit and create the solution that people really need.

REASON 4. LACK OF INVESTMENTS AND RESOURCE PROBLEMS

A common startup issue is a lack of investments and wasteful use of resources.

Raising funds is always difficult. Startups have to put much effort into getting potential investors interested in their idea. To make it more attractive, startups have to elaborate on their business plan and marketing strategies. The idea has to be clear and simple for investors to believe in it.

Although some startups manage to find the necessary investments many of them fail due to their irrational use.

For example, they invest in unnecessary product functionality or use the wrong development strategies. For instance, hiring full-time development teams when the budget is tight or outsourcing too complex functionality to a freelancer who doesn't have enough expertise for building it.

One of the effective ways to solve staff and spending issues in a startup is to develop a detailed resource plan. A resource plan helps companies to hire a sufficient number of employees and allocate their budgets wisely.

For this, startups often consider various engagement models for hiring highly skilled specialists from outsourcing companies, or any other strategies.

REASON 5. RELUCTANCE TO GET FEEDBACK ON PROTOTYPES

Many founders have a hard time allowing others to see their prototype until it is ready.

Failing to get feedback from potential customers is usually fatal to a startup. Do not be afraid of someone stealing your idea or that your prototype will not be perfect to be shown to the first people.

Getting feedback and criticism on prototypes will put you in a product improvement, adding or excluding features that people need.
HAVE AN IDEA FOR AN MVP?

REASON 6. LACK OF SOCIAL PRESENCE

If you want your startup to succeed, it's almost required to build an online presence for your company. Many startups fail to find success because they focus solely on delivering their product or service to the market without any thought towards the need for an online presence.

The best way to build your customer base and appeal to the audience is by setting up a strong online presence, which requires effective marketing skills.

To create an online presence that elevates your startup and brand, you need to build a website for your business, as well as a social media presence, the latter of which can be done on such platforms as Facebook, Twitter, Instagram, and LinkedIn.

The key to marketing your startup successfully on your website or social media page is to provide customers with relevant content regularly.

REASON 7. LEGAL PROBLEMS

Legal problems aren't the most common reason for startup failures. But there is no such thing as a small legal problem. Select legal experts from the start and establish relationships with legal advisors.

Legal problems have sunk quite a few startups before they ever reach the market. This is particularly true of highly regulated or intellectual property industries.

Conducting thorough research into the regulations affecting a particular product or industry is crucial. Identify the governing and regulating authorities for your startup.

Trademark, Copyright, and Patent laws can also be sticky areas. Thorough research by legal experts can be appropriate. The time and expense involved at the beginning are an investment in the startup's long-term value.
startup legal promlems

SUCCESS TIPS FOR YOUNG ENTREPRENEURS

We never know the outcome of our efforts unless we do it. Jeff Bezos said it helped to know that he wouldn't regret failure, but he would regret not trying.

Take the risk

Find good people

Who you're with is who you become. Reid Hoffman, the co-founder of LinkedIn, noted that the fastest way to change yourself is to hang out with people who are already the way you want to be.

Take action

The world is full of great ideas, but success only comes through action. Walt Disney once said that the easiest way to get started is to stop talking and start doing. That's true for your success as well.

Learn from mistakes

Many entrepreneurs point to mistakes as being their best teachers. When you learn from your mistakes, you move closer to success -- even though you initially failed.

Ask for customers' input

Assuming what customers want or need will never lead to success. This is how it works in life: ask people directly, and then carefully listen to what they say.

FINAL WORDS

Building a startup has always been a risky business.

Startup businesses have many issues to solve including taking the right product marketing steps, hiring and establishing strong and knowledgeable teams, and streamlining inner workflow.

Entrepreneurs are made, not born. Hard work, drive, and absolute determination can fill in the gaps in skills and experience. The rest is learned by doing, making mistakes, and adapting along the way.
DO YOU HAVE ANY QUESTIONS?