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Reasons for failure of Startups

A large number of start-ups are incorporated in every year but most of them do not last long. There are a lot of hindrances to them. Some of the reasons for the failure of startups are as follows:

1. No research prior to incorporation

Most of the startups lack in doing necessary market and financial research. They straight away form some company or LLP and jump into the business without having adequate knowledge about the industry and the related factors affecting the growth.  

2. Poor Execution

In most of the cases there is no absence of ideas rather the failure is due to the poor execution. They will not start operating. They will wait for a perfect start! A perfect start never comes! Whenever they start it will be the perfect start.  

3. Shortage of capital

Most of them will have good ideas but they lack financial support. They fail to form a better composition of investors, executors, and pioneers. There should be the perfect combination of all.

4. Over expectations

Too much expectation from the project is a big cause for the failure of startups. There should be financial awareness to start small with the fund available with them. Once they start working they can show their operational efficiency and can attract investors.

5. Ignorant about the cash flow

Generally, people will focus more on the profit and loss statements and balance sheets. No one is bothered about the cash flow statement. A cash flow statement is an indicator of the financial health of the entity. Thus, cash flows should not be ignored.  

6.  Serving or selling to defaulting customer

Serving or selling continuously to a disloyal customer results in wastage of resources. Which will further lead the project to financial loss. This must be avoided to a possible extent.

7. No or less focus on Networking

They will not try to focus on building the network. Networking is essential for the success of the business. Reaching the crowd is the secret to success!  

8. Losing hope at Introduction Stage

Most start-ups give up at the introduction stage. They will not wait to reach the growth stage. Initial failures, ups, and downs are common in business. One should not be demotivated at an early stage itself.

9. Diversification at the wrong phase

Diversification of the operations should be done only if the maturity stage of the earlier product line is achieved and there is a constant growth and profits from that product. Diversification in the wrong stage will cost more and end the whole project.

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