Do you have any personal experience with a failed business? Then it is very important for you understand the causes of your failure. It is the only way to not repeat the same mistakes. That is what Steve Tobak writes about on Entrepreneur.com. He is a management consultant who spent over twenty years in management in leading technology companies and experienced business failures himself. In the article entitled 9 Reasons Why Most Startups Fail he summarized the most common reasons of start-ups' failures he has learnt about in his consulting practice.
1. The entrepreneur has no notion about reality
He is so fixated on his vision that he loses the broader perspective. Working with investors who know the target market may be a solution to this very common mistake.
2. The product does not solve any big problems
The more complex the world, the more problems to be solved. Successful business projects offer a solution to a big problem that no one else can offer.
3. The company runs out of money
This happens to everyone who cannot define a budget and plan for long-term investments. Entrepreneurs often make a mistake when they do not want to invite investors.
4. The company does not have a product, only a concept
Many starting entrepreneurs do not realize the big difference between an idea, and a finished product that a customer will buy.
5. The strategy does not include important preconditions of the company's operation
These include e.g., the use of low-cost materials or the availability of the necessary components and infrastructure.
6. The company is managed by the wrong people
Many co-founders soon discover that they can't get along well. Others run away when their first strategy fails. When they stay, they lack the stamina to give the company their maximum effort everyday. Ask investors how they choose projects to invest in. They will tell you that the management team is as essential as the product.
7. Competitors do not want to give up
Many companies fail because their competition, which has offered similar products for a long time, proved to be stronger. Always be cautious about old, proven solutions.
8. The market develops in an unexpected direction
An entrepreneur must always think ahead and try to understand the complex patterns of his market. Of course, you cannot predict everything, but you can predict most of them.
9. Bad advisers give bad advice
Currently, there is a vast amount of information available for entrepreneurs on how to run successful businesses. However, the quality of the information is getting worse and worse. Therefore, be very cautious about this as well.
-Kk-