5 Reasons Why Startups Fail

5 Reasons Why Start-Ups Fail Spectacularly

Startups, Start-Ups and Start Ups are all newly established businesses that are still ramping up. Some are raging successes, while others fail. The secret ingredient is knowing what to expect, and what to do as you begin to accumulate wealth. Here are some of the commonest reasons for failure.

Reason 1 Is Unbelievable: No Market in the Gap

The biggest single reason why Start-Ups fail is because there is no market for their products where they try to sell them. I had a fellow come to me the other day with what sounded like a brilliant idea to open a chain of mobile hamburger stands in rural villages in the southern part of India.

“I’ve just come from there,” he told me. “I backpacked everywhere and I could not find a decent beef burger anywhere, although they had millions of cows”.

“Hold it a minute,” I said. “Did nobody tell you how much they revere cows”

 “Omigosh,” he said. “I clean forgot what you taught me about there having to be a market in the gap.”

His mistake was commoner than you think. While the lack of a supplier may mean you found a brilliant gap like Mark Zuckerberg did with Facebook, it can also mean that nobody wants to buy the idea.

Reason 2 is Crazy: Why Would I Want That?

A girl I once knew a zillion years ago when we use to not think, but drink and drive, caught social responsibility big time like a rash, bought an alcohol breath tester, and became exceptionally good at being a total bore over one drink all night. Do not get me wrong. I am not advocating irresponsible drinking and these days her idea might even have worked.

What she did was import 1,000 cheap breathalyzers from Japan (China was still busy having a socialist revolution) and wander around her town’s most popular drinking spots and clubs. She was about as successful as a temperance missionary I can tell you. It took her quite a while to figure out that people did not want to hear they had to stop. I never did find where the 997 unsold breathalyzers went.

Reason 3: Comes Down to Old-Fashioned Greed

The saying ‘A Fish Rots from the Head’ may belong the Inuit Indians in Alaska but it is totally gross all the same. Most Start-Ups that go down, sink because they run out of money. That’s the stuff my girlfriend shelled out to buy the 1,000 breathalyzers, but did not get back because nobody bought them off her, let alone paid for them.

We need to be extra careful not to take the profit out a business before the business can stand it. Mark Zuckerberg may have made his killing although he was a smart kid and waited for a while to earn an income. A business fails to swim when the owner takes the profit out to soon and kills the cash flow. There is an old saying I rather like. ‘Feed the monster first until it is good and ready to start feeding you.

Reason 4: The Debt Killing Machine is Waiting

If I caught your eye by making you think I was going to offer a perfect solution for debt then I’m sorry, I was thinking more about not having too much of it in the first place. Start-Ups that succeed are mean and lean and keep feeding cash back into the loop for more stock or more development.

There’s a pile of people out there wanting to lend newbie businesses money because they make more that way than by earning an honest living. When last did you visit a corporate bank headquarters? When you get into debt, you become their ‘slave’ because your money goes into their pockets not your own. If you must borrow money, pay it back yourself or your Start-Up could go into gridlock. Know the feeling?

Reason 5: Not Owning Your Slice of the Cake

Another horrid thing that banks do is place advertisements about wanting to be your business partner and advance 100% of the capital. The big franchises know this is baloney. If you want to buy into them, you have to have 50% of the money sitting unencumbered in your bank account. They know the Start-Up owner most likely to win the race is the Start-Up owner whose own personal money is at risk.

Margaret Thatcher, who was the friend of small business even if you don’t like her politics said, “The problem with socialism is that you eventually run out of other people's money.” The world is not a soft touch. Be brave, be resolute and work hard at it and you will score the winning goal.

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