Four Reasons Why Startups Fail

Did you know that according to a GEM report, 100 million businesses are launched worldwide every year? Let’s put that in perspective: at the end of today, about 264,000 businesses would have been formed across the world; and by the time you finish reading this post, over 300 businesses would have been started!

Before you get inspired to add to this number, it is worth knowing what a quick Google search will reveal -- that about 50% of new businesses fail within their first five years. Now, you’re probably tempted to think these businesses failed because their ideas were bad or there was no market for their product. While this might be so for some of them, here are some other less obvious reasons why even a good business, idea and all, could fail:

1. Poor Communication With Your Team and Clients
In every aspect of life, communication is a big deal. This is even more so in businesses where more is at stake. A miscommunication between your business and a client could spell doom for a sale, or even have more disastrous consequences. Being aligned with all players in your business translates to more efficient operations and increase in performance. That’s why it’s important to everyone involved in your company are on the same page, know about important decisions and are clear on expectations.

As you strive to communicate better, it is equally important to ask for feedback from your team members and your clients. That way, they know their opinion is important. And when you do get their feedback, make sure to incorporate relevant ones into your business processes.

2. Getting Press Attention Too Early
For most businesses, getting media mentions and press coverage is a thing they aspire to. They believe the results of this would be the silver bullet that guarantees their business success. But this is not always the case. While having your name in the spotlight could mean attracting new clients and getting more public awareness, there is also a downside to getting publicity too early.

Who would have thought being famous could be dangerous? It’s not the fame itself that kills your business, it is the potential inability to handle the attention. Sometimes, the consequent demand on your business far overweigh your available resources (time, skills or money) leaving clients dissatisfied. Some might say a spike in demand is a good problem to have, but consistently disappointing clients would hurt a business in dire ways.

3. Just Going With the Flow
When you’re just starting out, the common thing to do is just ‘wing things’, taking every day as it comes. This is mainly because in a new business, there is so much uncertainty. But there is something to be said for planning. A Mckinsey research showed that 79% of managers said a formal planning process played a significant role in developing strategies for the business. 51% of respondents whose companies had no formal process were dissatisfied with their approach to the development of strategy against only 20% of those at companies with a formal process.

Having a clear process, plan and roadmap for your business does not mean being rigid. It means everyone knows what you are working towards and they still have the flexibility on how to get there.

4. Micro Managing Employees
Nothing stifles creativity more than a micromanager, especially if you did a great job hiring talented employees. Although micromanagers are usually highly qualified and talented people themselves, when they micromanage, what they effectively say is that they don’t trust your employees to make smart decisions for the company. This can cause dissatisfaction with employees and it is one of the reasons why top employees resign.

Don’t know if you’re a micromanager? Ask yourself: am I able to delegate work and give autonomy to my employees? If the answer is no, then you’re probably one.


There, you have it. This is by no means an exhaustive list of why startups fail, but these are some of the ones we usually take for granted. Do you have any to add on? Share with us in the comments.

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