Common Reasons Why Startups Fail

Some studies say that only 1% of all startups become genuinely successful, and only 50% of the total number have existed for more than five years. Such a massive number of failures can be explained because inexperienced programmers tend to make similar mistakes. If you know about them in advance, there is an opportunity to avoid disappointment.

5 most obvious mistakes

There are 5 main reasons why most startups fail:

  • Market problems;
  • Failure of the Business Model;
  • Poor team leadership;
  • Lack of money;
  • Problems with the product.

To avoid falling into the statistics of startups that have failed, it is necessary to analyze the mistakes of other developers and understand how to prevent the same fate.

Market analysis

A group of people comes up with a brilliant idea, in their opinion. The team immediately starts developing it and does not first study the market. Then it turns out that this segment is already entire, or a more exciting project is being prepared in parallel.

Another reason could be that the app or site you want to build has no value. Think about your target audience, conduct small surveys (at least among your friends and acquaintances), and understand how many people will be interested in using your product.

Sometimes the timing of your startup’s launch matters. Sometimes the solutions can be way ahead of your judgment, or the technologies that fit your project haven’t been invented yet.

Also Read: Useful Tips For Those Who Want To Start A Business

Business Model failure

Practice shows that many startups are too optimistic about how easy it will be for them to find customers. It leads to errors in compiling the Business Model. In addition, sometimes novice specialists do not fully understand the cost of startups software development.

2 most important rules turn a blind eye:

  • CAC must be less than LTV, where CAC is customer acquisition cost and LTV is customer lifetime value.
  • Recover CAC in less than 12 months.

It can be challenging for an ordinary person to understand all the intricacies, so there is a need to seek help from a specialist. Let you spend money on it, but the risks will be significantly reduced, and investors will be more willing to cooperate with you.

Poor team leadership

Proper distribution of IT company roles is of great importance. You can hire a staff of first-class specialists, and it is illogical to assign them a task, break the logic, not calculate the time frame, and much more. Do not expect programmers to organize themselves, and they need a leader who will coordinate the work. If you put a person in the leader’s place who will not cope with his duties, you should not expect the team to give a good result.

Lack of money

In the first stages of work on a startup, the creators have to do the job at their own expense. You can start looking for investors when you already have the first results. It would help if you had a well-thought-out business plan and at least the layout of your program, application, or website by this time.

It is necessary to think in advance of such details as:

  • Advertising;
  • The cost of tools that are needed to create a product;
  • Salaries of employees;
  • The cost of the work of testers and other specialists who will be involved at certain stages of development;
  • Rental of premises (if necessary) and much more.

The problem is that many old papers are counting at the minimum cost. Some experts advise multiplying the amount received by 2, and then you cannot be sure that this money will be enough for you. Don’t be afraid to ask for more, the rest of the money to improve the product or increase advertising costs.

Product issues

Some startups hurry to release a product on time, and they neglect to conduct complete testing. It causes programs to exit with apparent errors.

Problems with a product significantly affect the reputation of developers, which becomes extremely difficult, and sometimes even impossible, to fix.

Outsourcing tech partner will help you create a genuinely high-quality product that will be competitive. For a small fee, experts will be able to identify possible errors and give recommendations on how to fix them quickly. It will allow you to get excellent results.

If your project continues to develop, then such testing should be carried out regularly: before introducing a new module or increasing the number of new users. It will give you an idea of ​​how well your program performs, what loads it can handle, and how well updates work.

The more attention you pay to customers’ comfort, the more likely they will use your product. So, testing the user interface and functionality should be your priority. Many large companies allocate more than 50% of the project cost for testing; of course, a startup cannot afford it, but regular manual testing must be carried out.

Also Read: Startup Management: 3 Ways To Get Ahead Of The Competition

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