Reasons Why Startups Fail
Many business owners understand the complexity of getting a business running properly so that they can have confidence that the profits will be brought in. However, if one talks to any of these entrepreneurs it will be clear that there are many common reasons that these works in progress take so many chances before getting it completely right. One of the most accurate and recent studies was released in 2019, and it found that something like 90% of all startups do not succeed. First year failure – 21.5%, Second year failure – 30%, Fifth year failure – 50%, and 10th year failure as high as 70%.
Entrepreneur and foreign policy expert Alexander Djerassi understands the nuances more in depth than many who do not have his similar experience and resume. He says that lack of talent or bad leadership are probably the primary number one reason that these start up companies do not make it. The entire team needs to be kept on task and performing to their standards, and this means that either the entrepreneur needs to be able to handle running the business or at least be able to delegate the tasks to others using well-balanced leadership skills. Many simply are not able to do this.
A second reason for such high failure rates is because they go into the arena without a sound support system. Reporting, cost control, revenue assurance, and ordering systems need to all be an integral part of such a support system. The great thing in today’s marketplace is that there are countless apps and on-demand cloud systems available that make this easier than ever. With smartphones and tablets the employees are now able to access critical data from anywhere while at the same time the owner is able to keep a proper cost over inventory and employee location at all times.
Alexander Djerassi was raised in the Santa Cruz mountains of California, and he knows the importance of not having lousy leadership and poor management is just about as critical as extreme survival tools for mountaineers. That is why the lack of management and leadership can be a third major reason for failure. He concludes that reason #4 is not preparing for the growth machine that follows an entrepreneur and that reason #5 is spending money on unproductive side ventures and bad planning.
Uncapitalized costs such as unaccounted for expenses for advertising and promotions can be a major problem although it is usually not the primary reason for failure in his assessment it can still be a sixth reason. Lousy business models and poor company growth can make the way into this model as reasons number 7 and 8. Starting too small comes in as number 9 because they do not come in with enough money to hire adequate employees, pay for office space, or handle marketing needs. The final number 10 reason in his statement is that poor hiring practices bring things down because background checks, interviewing, and hiring the proper team for the job is vital.