How to Set Yourself Up for Success and Avoid the Mistakes That Cause Most Startups to Fail

How to Set Yourself Up for Success and Avoid the Mistakes That Cause Most Startups to Fail

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It has been estimated that as many as 90% of startups fail within the first five years globally. Every year, both new and experienced entrepreneurs put their heart and soul into a new venture. I have built several businesses over the years as a serial entrepreneur. Some failed, but a few of them went on to be multi-million-dollar businesses with global offices.

Being an entrepreneur is often seen through rose-tinted glasses, but the reality is that it requires hard work, perseverance and grit. Expect to work long hours and find it difficult to balance work and family life. You will need to be able to design the product, acquire new customers, do the marketing, and take care of finances. It can be overwhelming to think of all the hats you’ll need to wear. There is no guarantee of success.

Why do so many startups fail. While lots of different factors can lead to startups failing, here are just a few of the top reasons:

Related: 5 Reasons Startups Fail (and Why Each One Is Preventable)

5 key reasons why startups fail

Cash problems:

One of the top reasons startups fail is they run out of cash or they fail to raise the capital they need. This can be due to many factors. They might struggle to attract investors or get them to support their idea. Or they may have difficulty obtaining the clients and customers they need to bring in money.

Startups are often not as planned and can be costly due to hitches along their way. Without cash flow, it will be difficult to get the work done in order to move the product to production and start making money. Furthermore, managing costs poorly can often make the difference between success and failure.

No market need:

Perhaps you feel that your idea is fantastic and solves a really important problem, but if it does not serve a market need, you are going to struggle to get interested buyers. This could mean that your product/service doesn’t fill a need in the market or there isn’t a market for what you are trying.

Some people try to avoid this problem by marketing their product to everyone. However, this can often be too broad and you may not be able to reach the right audience for your product or service. Even if you have a great business idea and it has a market need, it can still be a case of bad timing. You don’t want to be too early. The market may not be ready for you. If you wait too long, the market may be saturated or you may lose your market share.

Ousted by competition:

Awareness of competition and the overall market is essential if you are to come out as a leader since the competition can be fierce when it comes to business. Many entrepreneurs don’t take the time or effort to learn from others and create a unique value proposition that will help them stand out. Around 20% of startups fail due to being out-competed.

Having a flawed business model:

Business models are crucial to the success of a startup, enabling you to scale and become profitable. It can give startups a competitive advantage and help them to understand their operations better. It can also help establish a finance plan to increase cash flow, profitability, and improve cash flow. Yet, one of the top reasons startups fail is because entrepreneurs have a flawed business model, and as such, cannot scale or sustain the business.

Lack of passion or burnout:

Starting a new business can throw your work-life balance out of whack. While you may work long hours and weekends to keep up with the demands of your business, you are at risk of becoming burnt out. While it may be a badge for honor to work hard, it can have a detrimental impact on your health, your home life, and your work. If they don’t have the tools to manage the pressures of starting a startup, many entrepreneurs can fall into burnout.

Related: 5 Tips to Prevent a Startup Failure

How can entrepreneurs set themselves up for success?

As an entrepreneur myself, I know how challenging it can be to get a new business up and running and make a profit. That is why we at VentureRock, a digital venture capital platform and ecosystem of founders, backers and builders building the next generation of global tech companies, set up a 72-step program to help accelerate startups and reduce the startup failure rate.

While there is no magic formula to success, there are key points you can concentrate on to help you get on the right track.

Remembering the “why:”

This tip seems so simple, but it is crucial — and that is remembering the “why.” This could be the reason you do this or why your business is important. It can help you keep your eyes on the prize and identify the problem you are solving in the market. It also reminds you of your passion and provides a starting point for setting a solid foundation for your business and establishing core values. If you are only focused on making money and selling products, your chances of success in the long-term are low. Most people will give up. My company’s approach plays a crucial role in this. We work with startups from seed to scale and guide founders towards long-term success.

Playing to your strengths:

Playing to your strengths can be critical in early-stage startups, but they can often be your secret sauce and what makes your business yours. Your company can be distinguished by your unique strengths and qualities. Find ways to maximize your strengths and make them work for you. It is important to stay true to yourself and make sure that what you are doing is in alignment with your sense of happiness, purpose and meaning.

Getting support and building up a network:

As an entrepreneur myself, I am passionate about helping entrepreneurs succeed and to use my experience to help decrease the failure rate for startups. Getting the support you need early on can be key, whether that is joining groups or joining masterclasses with like-minded people to build up a network. I believe in working closely and with people who are already where I want to go. It can be extremely useful to have a mentor.

Related: 3 Ways to Avoid the Agony of Startup Failure

Being an entrepreneur often means you need to take a risk, but it is better to go for it than to regret not trying later on in life. You will never know what the end result of your efforts until it happens. And while there are likely to be some bumps along the way, having faith in yourself can help you get far.

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