Top 10 reasons why start-ups fail

Have you ever wondered what makes entrepreneurs a rare breed? It's because very few start-ups actually triumph in their endeavor. According to a research done by the U.S. Bureau of Labor Statistics, nearly six in ten businesses shut down within the first four years of operation. This is surely abstemious for anyone tempted to invest their time and personal savings into launching a new business. So what are the factors that turn out to be the obstacles in keeping a new business afloat in the perilous waters of the entrepreneurial sea? Mentioning below are the top ten reasons that, if not avoided, can sink a start-up. 

1. Ignoring customer feedback

For most start-ups, tunnel vision and not gathering user feedback are fatal flaws. If you ignore your users, it will be a tried and true way to fail. Listening to your customers, and more important, acting on the feedback they give is one of the best ways to transform a struggling business into a successful one. Customers are ultimately the ones responsible for the company's paycheck. By listening to their needs and desires, you can tailor your product and service to better meet their demands.

2. Poor management

In most cases, new business owners don't have relevant business and management expertise in key areas like finance, purchasing, selling, production, and hiring and managing employees. It can soon lead them to a disaster. Poor management also results in poor strategic thinking. To avoid that there should be a regular study, planning and controlling of all the operations of a start-up. A successful manager is the key element in a successful company, because he or she is responsible for creating a work climate that encourages productivity.

3. Poor Execution

It's the fine execution rather than a clever idea that matters the most in avoiding the downfall of most start-ups. In order to make a crisp execution, a start-up needs to evaluate skills and should pursue opportunities that are aligned with its strengths. Not only start-ups, even established companies can also stumble badly when they outgrow the capabilities of the founding team. 

4. Lack of funding

Entrepreneurs mostly underestimate the amount of time and capital necessary to reach cash flow breakeven, which is the reason why many promising ventures shut down prematurely. It's very important to be conservative with financial projections and then plan for enough funds when you launch to cover all sunk costs, including startup losses, until your company becomes cash flow positive. 

5. Failure to manage operating cost efficiently

Many failed start-ups have cited that the question of how to spend money was a frequent challenge and reason for their failure. It's a really tough act to decide whether to spend significantly upfront to get the product the off the group or to develop gradually over time. If a proper decision is not taken, it's possible that the start-up will run out of cash to keep going. 

6. Going after too small market

You may have the best products and services. But, will it make any huge difference if the market is too small or non-existent? Of course not. You should develop product after having researched the market and determining the existing opportunities. Developing a technology looking for a problem can make a start-up hankering after a small market, which is not helpful for it at any cost. 

7. Disharmony between founders

Generally, a start-up is a high-stress environment. Hence, disagreements among the owners about its directions or even division of profits can result into a crack within the tam. And if a key executive leaves in such a situation, it can bring a doomsday for a fledgling organization. 

8. Lack of vision

Lack of proper vision or focus is another vital reason for failure. Get one thing out on the market and focus on the product is very important. Otherwise you risk ending up with too many almost finished products that are not valuable to customers or you. 

9. Poor marketing

For a start-up to become successful, it's very important to know its target audience and the trick to get their attention and convert them to ultimate customers. In almost 30 percent of start-up failures, ineffective marketing was a primary cause of failure. Every start-up should ensure that it has someone who can find distribution channels and develops business relationships for the company. 

10. Product that never comes out of development

Developing the right product in accordance with the market need and releasing it in the market in time is very crucial for any company to survive. If the product never comes out of the development phase, it can easily lead the start-up to the verge of its end.  

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