The Most Common Reasons Why Startups Tend to Fail
Becoming an entrepreneur is in fashion nowadays. The title and reputation which entails the profile of an entrepreneur can really set your social standards up. However, entrepreneurship is not about raising your social profile because it is much more than that and its reality is harsher than what most expect.
According to a report by Startup Genome, over 90% of startups fail in their first year of operation. Startup failure is not a new thing at all and every entrepreneur anticipates failure and sometime around. It is only their sheer ability as a professional and certain resource which does not allow the probability of failure to grow. There a profound number of reasons why startups are likely to fail, and here are the most common explanations:
Challenges and pressure – Entrepreneurship is certainly not fit for everyone. A great number of entrepreneurs succumb to the challenges and unrelenting pressure which peaks during the initial years. An entrepreneur is judged by their emphatic ability to navigate through challenges and emerge successfully. However, not many of them survive and give in when things start to crumble around them. Working 100 hours a day, struggling to even make ends meet, and managing a hundred things at a time sounds a lot like the first year of a startup.
Lack of working capital – Raising capital to finance building a company is not enough. Even if you have great assets, you are not secure. A business has day-to-day affairs and expenses which can amount to thousands of dollars each month. Businesses fail to keep working capital to meet the most immediate needs, such as allowing credit to a supply. To combat this, startups require to raise additional capital. In Australia, Max Funding is a lending company that specializes in raising capital for startups and small businesses. Till date, the company has managed to help more than 8,500 SMEs in Australia operating in over 130 sectors. The Sydney-based firm offers loans starting from $2000 to over a million dollars. Their loan terms can span from a few months to 2-3 years. The processes are fairly easy and it does not involve time-consuming paperwork. Max Funding shares the ambitions of entrepreneurs and believes itself to be a partner serving the best interests of their clients.
Competition – In highly saturated industries like e-commerce, a startup would stumble upon intense competition. In fact, Amazon Inc. has acquired emerging e-commerce platforms to wipe away all sorts of competition. Mammoth corporations utilize a hundred times greater resources and operate on a different scale which directly impacts their results, and so they are able to keep the gap widening between them and their competitors. Consumers also are more likely to trust a bigger company with years of good reputation than a startup that has been around for a year or so.
Mistakes – Entrepreneurs are likely to make a ton of mistakes. It is easy to bounce back from some while others can be fatal. A bad PR, fatal marketing strategy, ineffective recruiting, or completely wrong market research are some of the apparent mistakes where there is no turning around.
This article was written by Isaac Rouhtas and published on Thriveglobal.com