MOST START-UPS FAIL WITHIN THE FIRST FIVE YEARS, WHY?
The desire to be their boss is the main compelling reason behind the majority of entrepreneurs starting their businesses, it comes with freedom, and with that freedom comes the flexibility to make decisions, and also flexibility from fixed income hence financial flexibility cum independence.
“I want to make more money to further my education and relieve my parents”, Mary a 24year old English student. So obviously, Money and thus financial independence is a major motivating factor for people to start their businesses.
WHAT IS A START-UP BUSINESS?
Start-up businesses are new businesses formed to fill holes and gaps in the market based on apparent demands for certain products and services. [1]The Small Business Administration(SBA) defines a “small” business as one with 500 employees or less
WHY DO START-UPS FAIL?
Nearly 90% of all start-ups fail and about 70% fail in the first five years, as unfortunate as this sounds, it is sadly the bitter truth. Starting a business is easier said than done and a lot of people fail to truly realize that a lot of variables come into play when starting a new business.
Lack of funds to stay afloat
When a business spends more than it earns, money will undoubtedly run out. This can be caused by a lot of reasons such as a sudden change in market pattern, an increase in the costs of business expenditures, poorly managed funds, or simply unintended or unforeseen circumstances or events.
It is a no-brainer to point out that profit must always exceed capital for a successful start-up to be successful. If not immediately at least in the shortest reasonable time to ensure the survivability of the enterprise
Poor research
A lot of people start businesses because they want to make fast money. They do so with only a faint idea of what they are doing and have no idea of the gravity of what they are getting into. This almost always ends badly with entrepreneurs losing big time and being part of the statistics of a failed business.
Inadequate marketing
Insufficient funding, false information, and lack of knowledge about the target demographic are major contributors to bad marketing. Some entrepreneurs are over ambitious even though they lack experience and frankly lack any marketing experience and as a result, tend to go for marketing tools that are not suitable for their business type.
Failure to understand the market
Oftentimes, entrepreneurs filled with million-dollar ideas or ideas misread the market demands. They fail to inquire if there is a need for their product in the market. The market is unbelievably complex and great expertise is required to accurately predict the success of a startup if at all.
Bad business plan
It is common knowledge that you need a business plan before you establish your startup. It is very important during the early stages of your startup. Now, it is important to know that a defective business plan is detrimental to the success of your startup. A business plan that doesn’t take into consideration factors that could lead to problems in the future is flawed. Some of the common mistakes in a business plan include but are not limited to lack of a solid plan, unrealistic expectations, and misreading market patterns during research.
Bad partnership
Partnership requires individuals to work cooperatively together to achieve a common goal, if co-founders of a startup cannot work productively together, a startup might fail. Creative differences might arise over time and partners tend to realize that they may have different goals and motivations concerning the startup and this poses a great threat to the success of a startup. Communication is usually a major bone of contention in the relationship amongst partners especially when the partnership is not built or based on commonly shared values.
Poor recruitment practices
The importance of hiring the right people to work for and with you cannot be overemphasized. Generally, the characteristics of a good worker are the ability to work well with others, diligence, and the ability to resolve issues. A lot of companies attribute their successes to the unique ideas brought up by creative people in their company amongst other things. However, if the core members of your staff or team are incompetent in certain areas it will have adverse effects on your company
Failure to adapt
Just like every other thing in life, a startup will face different obstacles along the line. Almost all successful startups encounter problems along the way. Failures, mistakes, and miscalculations are bound to happen, how you handle these circumstances determines the failure or success of your business. A common reason for the failure of startups is to make the necessary adjustment when these things happen.
CONCLUSION
Unfortunately, many startups do fail in the first five years of business. This is because a lot of variables or unanticipated events or circumstances can influence a start-up. Avoiding the mistakes that others have done, a start-up can thrive and flourish!
West Bay, The Gate, Tower 4,
