Why Do So Many Startups Fail?

Creating a startup can be an exciting time, but you must plan it correctly and understand why many startups fail. In today's market, we have a flood of startups and 10 percent of all startups fail within the first year. The industry matters little as many startups will eventually fail. An estimated 70 percent of startups fail within the first two to five years.

Lack of Knowledge

Many people who begin a startup don't know how to succeed in business. You can mitigate the risk through better knowledge. Many people enroll in business school to receive their master of business administration degree (MBA). The prohibitively high cost may have you wondering if you can afford school. You can request a student loan from a private lender to pay for your degree. Fill out an easy application online to get started. The lack of knowledge often leads to mishandling of funds. Effective use of your resources will lead to getting through the hard times as a business since these cycles will inevitably come. Learning how to get through the hard times will make you a better entrepreneur.

Part of the Learning Process

Considering how many businesses fail, you have to learn to take the failure as part of the learning process. Being an entrepreneur also isn't for everyone. Many times, you can do everything right, but if the timing is off, the business will still fail. Take it as a learning experience. Think of Colonel Sanders. He failed before he became world-famous for his Kentucky Fried Chicken. As you can see, he was someone who enjoyed the process of being an entrepreneur because he stuck with it throughout the years until he succeeded at age 40. He became a millionaire at age 60 and a billionaire at age 88. Having a startup is as much about enjoying the process as it is about success. And you can learn just as much from avoiding mistakes made by entrepreneurs as you can their perseverance.

Running out of Cash

Many startups fail because they are not following any good tips for properly managing finances and they run out of cash. Entrepreneurs must understand how much they have left and how to use it to go the farthest. You must know how to keep acquiring new customers and keeping the ones that you have happy. Many times, businesses fail to reach their milestones, which can lead to them running out of cash before they can replenish the business. In some cases, keeping cash reserves on hand can save you money.

Poor Product

Startups must contribute something of value in today's competitive environment. The biggest cause of failure for startups will come from the fact that they didn't push a strong enough product. You must meet the market inadequacy in a way that helps you to stand out. Don't feel bad if the first product brought to the market didn't meet the needs. Oftentimes, you will need to make revisions until you create a product that becomes a success in the business world. Think of feedback from the market as a productive way to refine your product to make it more valuable. Startups can fail for many reasons. You can do everything right and still fail.