Why Do So Many Startups Fail?

When startups set out to create the next big thing in technology and social media, they may not realize that anything in this world already exists and it is just a matter of time when somebody copies their idea and does it better.

A good thing they can do is continue looking for innovative ideas that solve problems in new and unique ways.

Successful startups are more than just catchphrases.They're the engine of the modern economy.

Silicon Valley’s actual gold rush is finding and keeping talented entrepreneurs passionate about building businesses with staying power.

Everyone knows that startups have a hard time succeeding.

They often face resources and geographical barriers and might not always know what aspect of the business they want to focus on.

But start-ups all make it through these difficulties, with some taking more ingenuity than others.

Why Do Startups Fail?

Approximately 33% of all startups never make it past five years, with the average lifespan being nine years.

Their founders are generally trying to do too much or to bring in too many people who might not be qualified for certain positions, meaning that the company isn't founded on a strong foundation.

One of the most popular myths is when a startup starts to see slow growth, they should pack up shop.

People are always looking for the next big thing when in reality, slower growth is actually the next big thing.

Why do so many startups fail? They don't know how to navigate slower growth curves.

The reason there are so many failed startups out of Stanford is because of the difficulty to estimate the correct market size for products.

What may seem like a viable industry to design a product for maybe an underdeveloped and/or lucrative opportunity if developed more.

Also, generational and cultural differences pose problems as well.

Generational differences affect traits such as financial awareness, self-reliance and impulsive tendencies

This can make marketing specific generational products difficult.

Cultural differences may affect traits such as perceptions on quality and levels of respect for authority figures among other things.

Whether it's due to generational or cultural differences, it's sometimes difficult to predict how the culture at large will react to new products that haven't been released yet.

What Are The Most Common Mistakes?

Part of the reason why startups fail is that they have inadequate market research.

Even with a great idea, it's important to validate before making big investments. Another mistake is not finding customers.

A good way to do so is by doing market research before dedicating time and resources to developing a product.

One of the most common mistakes is hiring the wrong people.

Another is not having a complete business plan in place, or mismanaging team members' expectations when developing one.

A startup should also avoid doing anything that would undermine the morale of its team.

A survey on the topic was recently published by Lighthouse Group, revealing that many startups commit one of four mistakes:

They focus too narrowly on their product, rather than on solving their customers' problems.

They fail to gain a customer base fast enough. They don't take steps to ensure that the business model is sustainable. Or they pursue a path that is "too high risk."

How to Avoid Failure?

It's not always obvious what factors contribute to the failure of a startup.

Many things come into play, including business planning, marketing, and even location.

Organizations may have adopted an outdated way of doing things. Or maybe the founders are expecting too much too quickly.

This is when mistakes are made. One possible mistake is not having sufficient capital in the warehouse when major orders come in - lack of inventory can be fatal for any company.

On the other hand, being frugal in financial management will reserve some cash for emergencies or just when you need it most.

One of the main causes of failure for startups is that they underestimate the amount of work required to run a business.

There are stages every startup must go through, and it's important to know where you are in relation to those.

Some other reasons for startup failure include not knowing your market well enough, weak founding team, improper scope or pricing, not finding product-market fit fast enough, etc.

The common mistakes that eventually lead many startups to failure can usually be traced back to a dearth of technical know-how.

The best way to avoid these pitfalls is to check your code for errors and have a technical advisory before going live.

If you plan on running a lean startup, it's always a good idea to teach yourself some coding so you can do basic fixes yourself instead of paying a programmer to do it for you.

Methods to Increase Your Chances of Success

Most startups fail by not fully understanding the market they're in.

The customer's needs can change from year to time, and no one will put in enough time in the beginning to make a prediction.

This happens a lot because entrepreneurs typically come from business or engineering backgrounds and don't have marketing experience.

One quick hack is to start with a plan marketing person could deliver marketing materials quickly and easily.

Not many startups fully appreciate the immense potential of influence that risky endeavors often entail.

Mistaking the adrenaline rush for certainty and the desire to be brave and take calculated risks for luck, they go about their business and eventually perish under a mountain of debt and administrative mismanagement.

For all those people just starting out on the path of entrepreneurship, here is a list of things you can do or avoid to increase your chances of success.

-Form strong partnerships with professionals who know more than you do.
- Have a detailed business plan, and have clear benchmarks for measuring your company's progress.
- Make use of peer groups to meet others going through the same challenges as you.
- Don't wait for perfection, launch early and fix problems quickly.

How to Build a Successful Company?

The truth is, building a successful company is a daunting task.

Experts say you can succeed by taking a step-by-step process that starts with creating an idea or inventing a solution to a problem.

You should then research your idea to ensure that it will have the most impact and empower others’ lives in some way.

Next, develop a prototype of your product and test it on consumers before scaling it globally.

Many companies fail for many reasons, but these are typically the major problems: No business model, bad management decisions, bad hiring.

Another possible reason that isn't always given enough attention - they don't solve a real problem.

Ask yourself, why does this make the world a better place? If it doesn't improve someone's life in some way, then it's not worth pursuing.

It might sound counter-intuitive to be skeptical of everything you hear and learn (news article or otherwise), but that mentality will help guide your thinking on what projects you pursue long-term.

Startups are so complicated, so here are some suggestions.

Have a mission statement that you can put on social media.

Have an active blog where you write every day about what is new in your business and share links to your products and services.

Actively interact with your followers in order to make them feel a part of the process because in this way they'll feel a sense of ownership in your product or service which will lead to customer loyalty.

Without a liberal marketing budget, creativity and focus will be key to getting the word out to consumers about your product or service.