Here is why that good startup failed
What you need to know:
- The business concept or model that startup is anchored on may also be a wrong one, and this comes about as a result of poor market research.
- At first, a few customers may be attracted as new entrants price their products or services a little lower than what other players in similar market segment are offering, but the entity may fail to win more owing to customer loyalty.
When staring out, all entrepreneurs hope to penetrate a given market segment and be a big player in that industry, or grow to be the captain of the industry. But along the way, challenges come and that startup abruptly leaves the scene or struggles to survive in a highly competitive market. Here are a few reasons most new businesses don’t live to see their third birthday.
Lack of sufficient knowledge on the market
The investor may have failed to study the market before starting out. It is important to do your research and know your market, especially if there is a demand for a specific product or produce. In your business plan, you must know what value you are adding, then do a risk assessment test as well as a SWOT (strengths, weakness, opportunities and threats) analysis. Only go ahead if the benefits outweigh the risks.
Failure to add value
If your product has a short shelf-life, think of value addition. One way of doing this is by converting raw produce into a finished product, for instance, making tomato sauce from tomatoes, or milk to cheese. This prolongs the shelf-life of a product.
Failure to position your business model well
The business concept or model that startup is anchored on may also be a wrong one, and this comes about as a result of poor market research. At first, a few customers may be attracted as new entrants price their products or services a little lower than what other players in similar market segment are offering, but the entity may fail to win more owing to customer loyalty.
It is essential to acquire customers on a large scale rather than maintaining a few who don’t add much value to the enterprise.
Poor management
A poorly thought out strategy and poor execution will not make a product or service penetrate the market no matter how hard you try.
Failure to plan well
In most cases, startups are dependent on their founders. Some people setting up new businesses may need to work other jobs to get the finances needed to keep the startup alive, but it would be unwise to do this in the long run. Once a business shows signs of breaking even and can stand on its own, the owners should resign from their jobs and concentrate on their new businesses, unless there is a compelling reason not to do so.
