4 Reasons Startups Fail, and How to Make Sure Yours Succeeds


If you think succeeding with a startup business is easy, think again.

More than 4 of every business startups fail, according to a recent study from Bloomberg.

It's a fact in virtually every industry, from manufacturing to construction, food service to retail.

Business Startups Fail for Different Reasons

Of course, no entrepreneur starts a new business with the intention of failing. Most work hard to ensure theirs succeeds?but they still fail.

For some, it comes down to inadequate planning.

For others, it's running out of money, and, for some, it's attempting to do everything themselves, including operations which require no small degree of expertise, like marketing and financial planning.

Although businesses fail for different reasons, some of those reasons are more common than others, including the following four:

1. Lack of Financial Experience

There's a reason people spend years in college studying to be accountants?it's not simple or easy.? Startup managers and CEOs who assume it is typically make bad financial decisions, from not effectively assessing their cash flow needs to not taking advantage of small business tax deductions.One recent study (DNA of an Entrepreneur), for example, discovered that more than 20% of new businesses run out of money so quickly that they begin paying bills with credit cards or taking out business loans shortly after they hang up their business sign.

Many simply don't consider the fact that some customers are weeks or months late paying for services rendered, leading to cash flow problems. Or they neglect to secure the business liability insurance which could pick up the slack.

Unless you or someone on your team has substantial experience managing business finances, you should consider outsourcing your financial operations.

2. Not Having a Sound Business Plan

Winging it might seem like a good idea, but not writing a sound business plan is almost always a mistake. A plan will help you anticipate problems down the road and get you from point A to point B without costly mistakes.

No two business plans are identical, but each should have certain common elements.

These include (at minimum) the following:

  • An executive summary.

  • A description of your company.

  • A market analysis.

  • A description of your company's organization and management.

  • A description of the products and/or services you offer.

  • A marketing plan.

  • Accurate financial projections.

3. Ineffective Marketing

Effectively marketing your new business is critically important and, like financial management, it's something best handled by experts.

For one thing, marketing has changed and become more complicated over the past decade.

Increasingly, businesses are competing on the internet and leveraging inbound marketing strategies like search engine optimization (SEO), pay-per-click (PPC) advertising, as well as social media, email and content marketing.To succeed, you're going to need a website that's easy to navigate and mobile-friendly, and which presents your products and services in the best light.

You're also going to need effective strategies to push prospective customers to your website (this is where those inbound strategies noted above come to the fore).

A smart marketing plan, one with reasonable and measurable goals and strategies to achieve those objectives, can spell the difference between success and failure.

Your best bet is to partner with an experienced digital marketing agency so you can compete effectively and succeed.

4. Lack of a "Unique Selling Proposition (USP)"

Whether you sell shoes or software, you can bet there are scores of other businesses selling similar products and services.

You need to ask yourself, "Why should someone buy from me instead of one of my competitors?”

Perhaps you offer products at a lower price, or maybe your customer service is superior.The point is, you need to give customers a compelling reason to buy from you, something often referred to as your "unique selling proposition," which, Entrepreneur, defines as in this way:

"The factor or consideration presented by a seller as the reason that one product or service is different from and better than that of the competition."

Make sure your USP is clear, concise and memorable.? And make sure that you're able to deliver whatever it is you promise.


Here's the good news: if many startups fail, many also succeed.

These are the ones which offer products and services consumers want, start out with a smart plan and outsource those operations they don't have the experience or expertise to manage themselves.

To learn more about the ways our financial modeling, CFO, bookkeeping, capital raising and financial reporting services will help you increase profitability and grow your business, contact us today.