Over the years, startups in Nigeria have been contributing vastly to the country’s GDP and these startups are become popular, as many people decide to have something doing as their side hustle.
Unemployed youths, students and even retired civil servants are turning to startup a business.
But unfortunately, about 90% of these startups fail and just about 7% succeed. Isn’t that discouraging? Yes, it is – everyone would want to scale up and soar as high as Coca Cola or Dangote Group.
What are these startups doing wrong? What are they not doing?
12 common reasons why Startups fail
There are hidden traps you should know about – if not, failure is sure. Below are 12 reasons why startups fail.
No market need
Who is the service aimed? What problem does the product or service solve? What makes the user use it?
Startups that succeed understand the market need for their product or service. They know they are solving a particular problem users are experiencing.
It’s simple, if people don’t want what you’re selling or the service you’re providing they’ll not patronize you and your business tends to die.
Most startups don’t test their products with users, they don’t ask for feedback or they don’t know who their target audience is.
One question every business owner must ask is – who is my customer? Ignoring customers in this sense now leads to ignoring their needs.
If the primary focus of startup founders is not the product, the end result might be disappointing for the user.
Listening to the user’s constructive remarks is very important, but more importantly is the product usability. Customer satisfaction is so important because it increases customers life time value.
No business model
A business model is the money making strategy of the business. Though, making just money in a business doesn’t make it a true business, but money is needed in running the business.
So, a good startup idea is not enough, founders should have a monetization strategy from the very beginning.
Not the right team
You can’t do everything all by yourself. There’ll be a time when you need to get a lot done at the same time and that’s why you need a team.
Each team member must have a role to play in the business. Lack of motivation, expertise or common vision can all contribute to a startups undoing.
Choose experienced people, and learn how to part with unsuitable ones.
Some startups err by thinking a great product or service will just advertise and sell itself.
People who create and produce poor products even market it. Why shouldn’t a good product be promoted then?
Poor marketing is when you market the wrong audience a good product through wrong channels.
This contributes to startups failure. So, good marketing should be an integral part of startups.
Startup founders change visions and ideas which make them too self-absorbed, instead on being absorbed in customers’ needs and finding ways to meet those needs.
Poor or No financing
Lack of good financing e.g sufficient running capital affects the overall productivity of startups.
True, startups seek loans to set up but it’s not advisable to start a business on debt. It takes time to get paying customers and in turn be able to pay back debts.
Loans with reasonable interest rates can be considered if you have a concrete business model.
Lack of Passion
Startup founders who are in for the money alone and not passionate about what they’re offering (idea), they can quickly lose traction.
A bad location surely contributes to small business failure. Being in an apt location will help founders see their startup through.
The right place will also have the audience most likely to use the startups product or service.
Some startups develop a great, but costly product or service, leading to under performance in sales and revenue. There should be deep pricing analysis before launching.
Struggling with your product pricing? Here are 3 price points to consider
Poor Money Management
Poor money management is one of the cheap money mistakes that kills small businesses.
Most startups don’t understand what profit really means in business, some can run out of cash not just when they are unfunded, but when they receive too much and spend recklessly.
Startups should learn how to plan finances from the very beginning.
In conclusion, if successful startups contribute hugely to every nations G.D.P and about 90% of them fail, founders of these startups should do a business assessment with this 12 reasons.
Those are my 12 most common reasons why startups fail. Want to add to the list? Use the comment box below.