According to Neil Patel, in one of his contributions on Forbes:

Nine out of ten startups will fail. This is a hard and bleak truth, but one that you’d do well to meditate on. Entrepreneurs may even want to write their failure postmortem before they launch their businesses.

Nine out of ten startups will fail

The truth is if you start a business today – regardless of the sort of business – the odds are well against you. However, you can minimize your propensity to fail by observing the drivers that are key in determining failure (or success) and finding the best ways to optimize your idea with respect to these drivers.

So here is the question again: Why do most startups fail?

1) Market problem

A major reason why companies fail is that they run into a problem of the existence of little or no market for the product that they have built.
There are 3 major events that could magnify this problem as the key setback to the flight of your idea.

· EVENT 1: People actually don’t need your idea (at least in the way you have presented it). Hence, NO MARKET.

· EVENT 2: People who have the pain and funds to access your product are too small for the scale required for profitability. Hence, SMALL MARKET.

· EVENT 3: Your idea is great, there is market, but somehow these 2 are not on the same page, government policies stand in the way or there is a dominant player in that space you simply can’t out muscle. Hence, MARKET IS INACCESSIBLE

· EVENT 4: You have a product that should have arrived 5years ago, or should arrive in 5years time. For example, launching a mobile 1st product in an environment that is still battling with internet bandwidth. Hence, MARKET TIMING IS WRONG.



2) Business Model Failure

Staying in business is simple: Acquire a customer for less than the lifetime value of that customer (LTV). What is hard is building a system around your idea that keeps you in business – fulfilling the simple condition.

Important questions you must ask yourself are:

· Can I find a scalable way to acquire customers?

· Can these customers be monetized at a significantly higher level than it costs to acquire them?



3) Poor management team

In as much as it is important to have an idea that solves a problem, one thing most startups don’t have is the right team. Investors and funder have continually iterated their decisions on what businesses and projects to invest in. One thing they have come to terms with is: A good idea in the hand of the wrong team will produce a bad result. What is a good team? A good team is one that can grind and execute.



4) Running out of cash

A lot of startups grow until they run out of cash. The rule is to manage your scale and keep it at a level where you can stay in business until your customers begin to pay, or investors/funders begin to show some trust financially. This majorly affect non-profits as they confuse good intentions for scalability and cash.

Always remember, if you run out of cash, your good intentions won’t matter anymore. Cash is king.



5) Product

Either you run a non-profit, software company, consulting firm or Media agency, you have a product; tangible or intangible. Your product must be tuned to meet the demand of your customers perfectly. To effectively fit your product to your market, the following questions demand answers:

· Who is your customer?

Looks like an easy question, but it is not. For a non-profit, for example, your customers are different from your consumers. Your consumers are the beneficiaries of your initiatives, your customers are the investors.

· Where is your customer?

· What does he/she need?

· Why does he/She need it?

· Is he/she currently getting it? If yes, from who?

· Does your product provide a better solution?

· Is this your better solution considered as value by your customer?

· How can he/she find you?

Getting the right product to market and keeping your business in business most of the time takes constant iteration and continuous change.

Any other reason for startup failure you know of, or have experienced? Kindly share in the comment section.

NOTE: This piece was written by me and initially published on www.curators.ng Contact Climaxbox to improve your business online Presence [url=climaxbox.com]Climaxbox Digital Marketing Agency[/url]