Startups are high risk high gain game and more often startups fail, 98% of startups fail and close down. But why do they fail, lets look at the prominent reasons behind its failure -:
1. The idea is poorly executed. Sometimes the idea is great but the execution process makes it fail.
2. A lot of ideas fail to cover a market size. Sometimes there is no market at all. Such ideas are bound to fail. It is important to make the product or the service useful to the consumers.
3. Leveraging costs could do the damage. It is better to keep most of the costs in the variable mode.
4. Making profit or breaking even immediately after the start should not be the goal. Making a good foundation should be. Moreover, making profit could wait at least for a year.
5. Sometimes the idea is already in the market. If there is no innovative or competitive advantage, the startups could face severe challenge.
6. At times, too much passion or enthusiasm could mean downfall. Without scale, it is not prudent to compete with industry leaders.
7. Sometimes the idea does not have space to grow-it suffocates itself when the matter of scaling up comes up. So, entrepreneurs need to make sure that they do not pick up a niche that has no or very little growth potential.
8. Pricing strategy is very important. As mentioned earlier, at the beginning, entrepreneurs should try to limit the profit that they are looking to earn from products or services. Making a trusting customer-base is more important for startups.
9. As the idea moves forward, sometimes the founding team breaks up. This is a terrible time for any startup-make sure that the founding team remains intact.
10. Sometimes, with initial success, a rapid growth is achieved. Entrepreneurs should remember that with growth, scenario could change very widely and this could mean blockage and lot of pressure on the founders. Controlled growth should be the idea approach.
- Hitesh, vcBytes.com