Why Do Most Entrepreneurs Fail?


Many people are leaving behind their 9 to 5 jobs and trying their hand at entrepreneurship. But new entrepreneurs need to be aware of the risks. A lot of startups fail because founders are unprepared, unable to manage their cash flow, or unable to keep up with the demanding nature of running a business.

Just to put things into perspective, around 90 percent of new startups fail, while 75 percent of venture-backed startups fail. Under 50 percent of businesses make it to their fifth year. Even fewer startups make it to the 10-year mark, with only 33 percent of businesses reaching this milestone.

If your startup actually becomes profitable, then you are part of the 40 percent that make it.

It is therefore important to take a look at some of the most common reasons for startup failure. It will help guide your decisions and keep you on the right track. Avoiding these common mistakes will increase your chances of becoming a successful entrepreneur.

Why Most Entrepreneurs Fail: Because They Quit

A lot of entrepreneurs make the mistake of quitting too soon, not realizing that building a business from the ground up is going to be a difficult experience—one that requires resilience and perseverance. If you quit at the first sign of trouble, then all your planning, research, and investments would be for nothing.

If you don’t have the patience or persistence to keep going, then entrepreneurship might not be for you. But if you do want your startup to succeed, then you need to understand that there will be tough times. Your startup will go through all sorts of ups and downs, and you need to keep working on it, or else that is as far as you will go.

Focus on your capabilities and don’t give up right away. You don’t need to become a “Jack of all Trades” overnight. As the founder of a startup, you need to focus on the most important aspects of your business instead of getting distracted by all the things you think you need to do. Otherwise, you might find yourself overwhelmed.

Set your sights on what’s important and channel all your energy into that. Scaling and growth will come later.

Ignoring Competition

When you do start getting customers, it’s easy to feel like you are on top of the world. Unfortunately, this can be the downfall of many startups. They think they are the only ones in the market, when in fact there are already thousands of players in the same industry.

Assuming you are the only one in the market is not a good idea. If you realize that you have competition around you, you can start conducting proper analysis on them so that you can adjust your strategy accordingly. Studying your competitors can help you get ahead and become a leader in your industry.

Ignore your competition and your startup will fail to grow.

Not Building a Team

In the beginning, you will want to focus on yourself and your co-founders. But as your startup grows, you will have to start hiring other people to do certain tasks. Having a team of people who are experts in their own respective fields will help your company grow by accomplishing more.

But you shouldn’t just hire people for the sake of it. Your goal should be to build a team of people with complementary skills. You will find it easier to reach goals when everyone is reliable and accountable.

While you are the main force of the startup, doing it alone is a bad idea. You will need a lot of people if your goal is to build your business from the ground up. It’s about empowering yourself and then empowering others around you. A big part of entrepreneurship is about trusting and empowering other people.

Running Out of Money

This is the most common reason why startups fail. Not all entrepreneurs are experts when it comes to managing their finances, and this is especially true for those who are launching their very first startup. Sometimes founders invest too much money too soon, not knowing whether there is an audience for their product or not. Some founders don’t put in the required amount of money in the first place.

Even if you have a brilliant idea, you need funds to get your startup rolling. Lack of proper funding can lead to your company’s failure. Do not start a business without sufficient capital in hand. Always remember that it will take time before your startup begins being profitable. You need to have enough funds to survive for months with almost no income. Invest wisely and learn how to manage your cash flow intelligently.

Marketing Problems

Even if you spend years perfecting your product, your startup won’t take off if you don’t know how to market it properly. A lot of entrepreneurs think that if they “build it, they will come”. But this is certainly not the case for startups.

Ignoring marketing is like opening a company and not wanting other people to know about it. Without marketing, you will struggle to find customers outside of your own social circle.

Market your new brand and tell the relevant audience about it. You don’t have to go for TV commercials or any other expensive medium. You can use social media marketing, for example, which is free and can help you reach a wide audience.

LinkedIn is one of the best social networking sites for marketing, especially for B2B marketing. It is the biggest platform for professionals online, and it is full of leads and prospects.

There are plenty of common mistakes to avoid, but hopefully you can improve your chances of success by following this guide. A brilliant idea is not enough to keep your business afloat in the extremely competitive world of entrepreneurship. You need passion, dedication, funds, marketing strategies, and a team of competent individuals who can bring out the best in your startup.

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