06/10/2021
๐ง๐ต๐ฒ ๐ฏ๐ถ๐ด๐ด๐ฒ๐๐ ๐ฟ๐ฒ๐ฎ๐๐ผ๐ป ๐๐ต๐ ๐ฆ๐๐ฎ๐ฟ๐๐๐ฝ๐/๐ฏ๐๐๐ถ๐ป๐ฒ๐๐๐ฒ๐ ๐ณ๐ฎ๐ถ๐น
Are you aware of what the statistics for startup failures are?
According to a recent article published on embroker.com, it was noted that about 90% of all startups fail by the fifth year and 10% of these failures usually happen within the first year of business.
This means that for every 10 startups that were started this year, 1 is going to fail by the end of the year whereas almost 9 of them will not exist by the fifth year.
This is alarming for someone like me looking forward to building my own startup. Getting to read these statistics made me anxious and zealous at the same time to find out what could be the cause of such a huge number of failures and what could be done by myself and my team or any other person to mitigate these.
Would you want your business to fail within the first year of starting it? Or do you wish to go out of business by the fifth year of operating?
Obviously not! I don't think any startup founder(s) ever envisage going out of business when starting. Almost every founder looks forward to running a successful business and all you can envisage is how you are going to earn some of the millions (in whichever currency) that others are also making.
Some others too are envisaging how they would earn the trust of various angel investors or venture capitalists to invest huge sums of money in their business and put them high up in the market.
These are all valid expectations for every startup founder. But the question is: if startup failure is at this high rate then what should I as a founder do from the beginning in order not to fall prey to whatever is causing these sorts of failures.
As curious as I am about this topic, I have done a lot of research about it because failure cannot be my portion and by hook or crook, I want to be part of the 10% that will succeed.
Wouldn't you want to know what is responsible for such high statistics for startup failures in order to avoid them and also join the 10% that succeeds?
Of course, I know you would like to know and that's why I am sharing what I discovered with you in this post.
During my research into this topic, I came across a lot of reasons which were attributed to be the causes of startup failures. However, I found out that a particular person's own encompassed all the others, and his explanation made so much sense.
That is what I picked up and would like to share with you today.
It was an interview that the billionaire owner of the NBA team, the Dallas Mavericks, Mark Cuban, granted one of my favorite entrepreneurs, Patrick Ben David (Valuetainment channel on YouTube).
In the interview, when Pat asked Mark Cuban about what he thought was the number one reason why startups/businesses fail based on his personal experience and also his experience as a shark (part of the shark tank team - check this on YouTube if you don't know what it is).
He gave an outright answer which came out as if he didn't even have to think about the question. My guess is he had come to that understanding over time and had that information at his fingertips.
As such, you and I also need this information at our fingertips.
The answer he gave was: LACK OF BRAINS, LACK OF EFFORTS.
According to the billionaire, these are the two main reasons why businesses/startups fail and these are basic and applicable to any business at all.
He went on to explain these two reasons for failure.
With respect to the lack of brains, he explained that you are going to go out of business if you are not ready to learn all you can about your business and the industry that you are getting into. He went on to mention that no one enters a business in a vacuum.
No matter what, your business is, you are in competition with others. What this means to him is that, whichever business you are getting into now, someone else is doing a similar thing and for that matter, they may know as much as you know now.
They also want to win and hence will be willing to add on to their current knowledge. If you, therefore, do not commit yourself to learn more about the business or the industry you are getting into then your competitors are going to kick you out of business.
Therefore, lack of brains (not willing to learn) is a primary reason why businesses fail.
To the second reason, he went on to explain that even for people with the right set of knowledge, the differentiating factor is your ability to execute on your knowledge or in simple terms your ability to do the work.
If you are not willing to do the work, any of your competitors who outworks you can put you out of business.
As simple as these two reasons sound, they are indeed the reasons why most startups fail. If you take failed individual startups or businesses and look at the various reasons why they failed, you will come to appreciate that the underlying reasons are indeed lack of brains and lack of effort.
Let's take a look at some of the reasons stated by some startup founders for their failure and see if what Mark Cuban taught us is true or not:
- Running out of cash (from funding or personal money):
Let's relate this to the two main reasons. Were the founders willing to learn how to raise funds to support their business and did they put in the work to actually get the money?
Did they put in the work to learn about the potential of their idea? Were they willing to learn about why their idea wouldn't work, what their customers thought of their product and all?
In summary, their lack of knowledge or efforts led them to not having enough money to sustain their business.
Others include: Failure because of
- competition
- Pricing or cost issues
- User unfriendly products
- Poor marketing
- Cash flow problems
Your assignment now is to see how the two reasons act as underlying reasons to any of the above reasons stated by various failed startups as the reasons for their failures.
It is therefore imperative that everyone willing to build a successful startup or business that will stand the test of time should have the following traits:
- Readiness to learn all you can about your business, industry, products, users, potential investors, etc
- Readiness to put in the work (effort) to achieve all your goals
Is there any other reason you think is responsible for the failure of businesses that are not captured within these two? Comment it below and let us also learn from your experience or opinions.
- Written by: ๐๐ฟ. ๐๐ต๐ผ๐ป๐ฒ๐ฎ๐ต ๐ข๐ฏ๐ฒ๐ฑ (๐๐๐๐ง๐ข๐๐๐๐จ๐ฉ &๐๐ข๐ฅ; ๐ฟ๐๐๐๐ฉ๐๐ก ๐พ๐ค๐ฃ๐จ๐ช๐ก๐ฉ๐๐ฃ๐ฉ)