Why Startups Fail and How to Avoid them

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Why Startups Fail and How to Avoid them

Startups are everywhere. They are springing up and helping us solve problems in different sectors of the economy.

However, with this huge growth, we also hear about some startups failing, and this may scare some people thinking of starting their own startup

Why Startups Fail and How to Avoid them

According to research, here are some reasons why startups fail:

1. Not testing the idea: before starting a startup, do you know if there is a demand for that product/service in the market? Do you know if you need to refine something about your idea or product before launch? Are you solving a problem with your product/service?

And so, one of the ways to avoid this is to endeavour to test your idea and study the results of your research to know the things you need to improve or adjust.

2. Lack of Capital: lack of capital is one of the major reasons why startups fail. The inability to raise funds for important things such as paying staff, purchasing equipment, getting materials, etc. for your business is a problem that affects some startups.

How do you avoid this? Get creative with raising capital. Ask friends and families to support you, crowdfund your idea, learn a skill that will save you lots of money you would have spent on hiring someone else, etc. for instance, if you need to design some graphics, can you learn how to design the graphics yourself, rather than outsourcing it? Also, before starting a business, it has been advised in some quarters that having the money you will need for a particular period of time (about 6 months to 1 year) is important before you start making lots of profits (depending on the kind of business you have)

3. Not Hiring Right: no matter the kind of business you are running, it is important to note that hiring the right team is important. Your team consists of people who will help you work on those dreams for your business and carry them out. And so, don’t be in a hurry to hire that you don’t hire right.

How do you then avoid this?

Have a clear job description and requirements for each role, and ensure that whoever you choose to hire is one that matches with most of the requirements you have.

4. Lack of Management Skill: no matter the sector you are, you need to understand how to effectively manage your team or those that work with you. Effective leadership is an important aspect of managing any organisation. However, if you don’t effectively manage your resources (money, time, man, equipment, etc.) then there might be problems with running the startup.

How do you avoid this? Learn all you need to know about management; attend seminars and workshops, read widely on it, ask questions, etc.

5. Not Knowing your Numbers: it is one thing to not have enough capital, it is another thing to have capital but not know how if your business is profitable or not. If you don’t monitor your cash flow, how would you know the progress of your business?

How can you avoid this? outsource this part of your business if you don’t know how to or if you don’t have enough time to keep your books. In addition, keep learning about accounting and bookkeeping.


We would like to hear from you, let us know some other reasons not listed above that makes startups fail!

Ayishat Amoo
Ayishat Amoo
Ayishat Amoo is a Christ follower who is passionate about encouraging people, and motivating people to be better. She is a voracious reader, researcher, as well as a fashion enthusiast.