According to a recent study by Forbes, 90% of startups fail to succeed. As much as the number seems shocking to us, this is a hard and bleak truth, one that should be meditated upon.
We at Thinking Spree involved ourselves in yearlong research finding out the root causes behind such huge no. of unsuccessful journeys. It comes out that the majority of new-age entrepreneurs today lack expert insights in their business model which ultimately leads to a failure by adopting the wrong strategies.
So, on a scale of 1-10, how important it is to have an expert’s advice on your business idea? The simple and most definite answer to the question is it is just not quantifiable in mere numbers. While the needs differ depending upon the current functioning and stage of the business, advises do matter in every phase. To build upon the notion, CB Insights recently parsed 101 post-mortem essays by startup founders to pinpoint the reasons they believe their company failed. The results are summarised below-
The scenario clearly highlights one major issue with the founders, lack of the right strategies and perspective towards their idea. Merely moving forward with a self-conceived vision is just not enough (read fatal), rather moving confidently towards success after idea validation from the experts is what it takes to be the next gamechanger. Naturally, the question arises as to how do experts assert their significance? Well, there is no simple answer to the question, neither one that can’t be explained. The answer lies in learning from failures, analyzing ways in which experts would have helped the founders turnaround their failures. After all, startups don’t die, they commit suicides.
Find the right market for the end product
“Shriya came up with a brilliant idea to provide groceries online in rural areas. Determined to scale up the business and achieve a major breakthrough in an erstwhile old-fashioned offline supply chain, she at once adopted the Get Big Fast (GBF) business model. The end result was a disaster and she had to file for bankruptcy.”
What went wrong?
Choosing the wrong market for the product, a product which was well ahead of its time for the rural areas hence losing its effectiveness.
This isn’t the only case, 42% of startups today fail because of targeting the wrong markets. Motivated by their brilliant idea, they fail to realize the importance of having an expert opinion on their business action plan, experts who have a vast experience in the same product segment and can pinpoint the right strategies to target the right market for their product. According to a recent study by SBA, more than 70% of the mentored business ideas successfully make it past 5 years of survival, hence the idea.
Form strategies which align with business objectives
“Technostic, a startup working in SaaS once known for its rapid growth and regarded highly, met a major roadblock before it ultimately crashed. It made a big mistake by ignoring customer needs and focussing more on product engineering before finally incurring heavy losses in cash and stock.”
What went wrong?
Adopting the growth strategies wrongly. Technostic’s story is a cautionary tale for entrepreneurs on the risks of going for a rapid growth strategy without analyzing the limits and requirements. Lack of a concrete business model and poor marketing strategies together account for a large no. of failures of ideas at an early stage. They often lack the much-needed guidance from the right people to help them create a sustainable model, ideas that enable them to efficiently work towards their objectives. On the marketing front, there remains a gap between the entrepreneurs and marketing experts, one that needs to be bridged to provide just the right boom in upselling of their ideas.
Get an outsider’s perspective (read unbiased) on current business functioning
“Despite being too sure about the usability of his product, Rohan could not see his business idea through to success. When asked about why he failed, he often quotes- “One of the hardest things about running your own company is that everyone turns to you, but you never have anyone to turn to.”
What went wrong?
Lack of an outsider’s perspective. Often, there is a lack of a third-person perspective who can provide unbiased inputs to validate the idea which makes the founders too sure about their strategy, being overconfident which ultimately leads to failure.
Believe it or not, one of the main reasons of failing for new-age firms is the lack of an outsider’s perspective on their business. While big companies have the resources to hire star professionals as CEOs to provide much-needed business insights, startups often lack these options. As a result, they start placing too much trust in their intuitions which ultimately drive them to failure. According to a recent survey by Kabbage, Inc., 63% of business owners lack access to professional advice which has a direct impact on their growth.
In retrospection, every business irrespective of its scale of success once started with an idea and adopting the right steps onwards. After all, every of those glorified business giants like Facebook, Apple, etc were once mentored by experts before turning big. Hence, it’s high time to realize that experts and strategies are the two sides of the same coin who define a firm’s success by working in close correlation.
About the Author:
Rana Madhvendra: Student, startup enthusiast. I write long sentences and yet find myself to be a minimalist. Unironically, that's ironic.