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Why some start-ups fail – and how to avoid it

It often seems like start-ups have all the fun. Appearing to live the life of Riley, playing table football in their trendy office by day and partying all night, rubbing shoulders with other enviably young, charismatic types – life is just one big holiday for them, right?

Wrong. The cold, hard truth of the matter is that just 1 in 10 start-ups actually succeed. But if 90% of start-ups end up on the scrapheap, is there any point in even trying? Why, of course there is!

Sometimes failure is inevitable, but more often than not, there’s at least one major flaw that could have been avoided. So it’s best to try and learn from successful entrepreneurs past mistakes (as well as your own) because most of them have failed in some way, shape or form at one stage or another.

The issues:

Market problems

The sad and rather depressing truth is that it would seem most start-ups are doomed to fail from the word go.

CB Insights analysed 101 start-up failures and compiled a list of the top 20 reasons why things didn’t quite work out for these budding entrepreneurs – a massive 42% failed simply because there was no market or need for their product.

Anyone that’s sat through some of the cringeworthy pitches on Dragons Den won’t be at all surprised by this fact – cucumber cap, anyone?

It’s quite often the case, however, that it’s not so much that the idea is bad, but more a question of timing or market size. You could invent an amazing product, but it could be too ahead of its time or perhaps too niche to command a sufficient return on investment.

How do you avoid it? Market research. Never rely on friends, family and social media followers alone to do this. Instead, seek out other methods that will give you a more realistic snapshot of your intended market. Surveying a cross section of your target market can make a world of difference in determining whether there will be demand for your product.

Business model failure

Another common fail is that some start-ups are far too optimistic about how easy it will be to attract customers. Having a genuinely brilliant idea and shiny new website doesn’t automatically equal success. People have to know about it, so there’s a good chance you’ll have to throw a lot of money at your marketing campaign to get things moving.

Although you need to factor in such costs when writing your business plan, if the amount you’re shelling out to attract each customer exceeds the amount of profit they are bringing in, then it’s best you go back to the drawing board and scratch out a Plan B.

You can’t get the staff…

Monkey with banana

It’s one thing to come up with a genius idea, but another to recruit a team that share the same passion for the project as you do.

Any weak link in a start-up team has the potential to bring your vision crashing down at any time, so choose your staff carefully…especially if you do plan to set up shop with loved ones, remember to remove those rose-tinted spectacles.

The best way to protect yourself from this is to be brutally frugal and strip costs back to the very bare essentials. Yes, your product needs to be good, as does your website, but don’t be tempted to add on any unnecessary bells and whistles to begin with, as you need to get the ball running first.

Marketing on a shoestring

Shelling out on expensive marketing is another way to put extra strain on the coffers. Get online and see if you can find some freelance developers, designers and writers.

A lot of marketers do freelance work on evenings and weekends, so why pay an arm and a leg for a prominent agency, when you can get some awesome talent at a fraction of the price!

Another big money-burner is office rental space. Although working in a home environment is not always ideal, if you have space to set up an office, then you could be quids in. If you need to appear more professional to clients, then a virtual office is always a cheap and cheerful option.

Learning from the mistakes of those that went before you can really help sharpen your strategy, so that not a single stone is left unturned. A great resource for this is Autopsy.io. (Don’t be put off by its name).

Here, you will find a brief summary of what went wrong, with the option to click onto the full story as told by the failed start-up. The accounts are refreshingly honest; one reads ‘’we were naïve idiots’’.

But don’t worry – many of them picked themselves up and moved on, ending on a happier note, so there is some light at the end of the tunnel. Go forth, be brave, be amazing and good luck!