Top Reasons Why Most Startups Die in their First Year

why startup fails

Cold statistics say that 90% of startups fail. The truth is sobering, but don’t let it discourage you on your way to your dream business. Take it rather as a reminder of continuous self-analysis, reality check, and hard work.

If you don’t know how to set up a business website or run a marketing campaign, you can hire experts who will do it for you. However, once you are in the startup boat with your team on board, you cannot outsource leadership and vision. This is what you must master yourself in order to overpass the abyss and bring your company to the solid ground.

There are consistent factors that define whether your startup will make it or fail it. Let’s have a closer look at the top reasons why most startups got ruined in less than a year.

Rigid founders who are “always right”

Many people blame startups for being risky and doomed to fail. However, startups are just vehicles that help people reach their goals. They aren’t good or bad on their own. If a startup fails, it’s not the startup nature’s fault, but rather the fault of people running it, basically founders.

The most popular mistake founders make is being too stubborn about the original concept and inability to pivot. Very often, founders mistake passion and commitment for blindness and inability to admit they need changes. Many of them get into the trap of their ego.

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They believe they are the smartest, they never make mistakes, and they don’t need other people’s advice. For this reason, serial entrepreneurs and beginners who don’t have a leading experience behind their back differ like day and night.

A product no one needs

This is the most obvious reason for the most startups’ failure: unwanted product. If you are going to fork out for creating a product, first make sure there is a demand for it. It takes some market research, feasibility studies, and analytics but goes a long way.

Even digital products aren’t exempted from this rule. Creating a digital product that no one needs or that decreases in demand within a few days of launch are going to amount to failure. Many great startups have failed simply because they fail to align their products to what’s actually needed by consumers.

Worked in the business but not on it

You may have a great product and a great team of experts each working on their specific task. However, segmenting responsibilities and roles can be dangerous as in startups, responsibilities usually overlap. Everyone in your team must be motivated to work for the company not just in it.

Many startups failed within their first year because they undermined the importance of teamwork, personal devotion to work, and total recourse to motivate their staff.

Inflexible team with scarce skills

Scalability isn’t possible without flexibility, which is not only about versatile skills in your team. It is about mindset ready for changes. Most startups didn’t survive the harsh times because the team wasn’t flexible enough to take up new approaches, rebrand, shift over to a new market, or start again from scratch.

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Startups that are founded by multiple people tend to be more successful than those having a single founder because of partnership, better accountability, matchless dedication, and fresh perspectives.

They didn’t grow fast enough and eventually ran out of cash

Fast growth is a sign that you entered the right market with the right product. Companies that didn’t make an accelerated growth at the beginning weren’t able to secure funding on its later stages. Sooner or later, the company runs out of cash and becomes unable to fight for competition, customers, and even staff.

Another mistake founders often make is taking too high salaries. Such an avarice results in a necessity to raise even more money, and eventually, dilution.

Poor Marketing

Poor Marketing: a top Reason Why Most Startups Fail in their First Year
(c) giphy.com

Poor marketing is another top reason why most startups fail in their first year. A lot of startups with single founders (mostly) are created with the idea that customers are going jump to the product with little or no advert and/or media promotions. As a result of this, miserly/no budget is set aside for ads.

When a product isn’t promoted, how are their potential clients going to find them? This is why many startups that pay less attention to proper marketing live no longer than a year.

Wrap Up:

These are not the only reasons why most startups fail in their first year. We just mentioned those having the most dramatic effect. You should also beware of such dangers as the lack of mentorship, the absence of a business model, cost issue, ignoring customers, and unbearable competition. There is a lot to meditate on before you STARTUP.

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Have some other reasons why most startups fail in their first year? Share them with us below.

4 COMMENTS

  1. I totally agree with the post, wherever there is Poor Marketing the Business is for sure going to end
    Great post, really enjoyed reading this post.

  2. Abubakar Musa Usman

    Lack of good funding is the “Achilles heel” that’s stepping down so many startups and also I strongly believe in hiring experts first on any business enterprise you choose to go with.

  3. Lack of good funding is the “Achilles heel” that’s stepping down so many startups and also I strongly believe in hiring experts first on any business enterprise you choose to go with.

  4. There are many reasons why a startup fails but majorly I believe that – what makes a startup fail is it not being managed financially well. Women-controlled startups are more likely to gain success because they are very good with managing their financials which is very critical for most businesses at initial stages. To succeed, you’d need to avoid the many mistakes which make a venture to become failure although having a potential product.

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