90% of Start-Ups will fail. What is the main cause?
Updated: Nov 14, 2020
Solar modules are proven to be highly reliable with a failure rate of 0.05% based on a report from the U.S Department of Energy that examined 54.500 PV systems however when it comes to startups in Solar Energy and other sectors the story is different.
7.5 out of 10 venture-backed startups fail. 90% of startups fail with 10% within the first year and 70% falling between years 2 and 5. Only 1% of startups evolve into a unicorn startup, like Uber and Airbnb. Let’s go back to the basic purpose of every business which is to generate revenue and profit. This process has two major pillars a) your business and b) the client. Without clients, your business will not generate profits and revenue and will ultimately fail. By investing the greatest deal of your time and brain activity pitching to investors instead of pitching your business to potential clients, shifts your attention from your number goal which is not to secure the next funding round but to Acquire New Customers. Your Startup Business needs an effective Sales Strategy in combination with skilful individuals to implement it. Its ability to attract and retain customers will keep it afloat.
Understand how to monetize your business. Organic growth is the key to Startup success. Not external funding.
In the full CB Insights survey based article I demonstrate in a nutshell that the top 5 reasons of startup failure are sales related.
As we will observe in the above photo of the Article 50% of the top 10 reasons for Startup failure are directly or indirectly Sales related. And this leads to one main conclusion. Most young entrepreneurs spend more time developing the general concept and technical specifications of their product or service than they spend brainstorming and implementing Strategies that will ensure that their offering will attract the customer's attention and will ultimately prompt them to buy.
1) No Market Need = Sales. No market need or non-ability to effectively communicate your SP’s and USP’s? In Which market(s)? Perhaps you should have gone International earlier? Have you thoroughly thought of and designed an effective Sales Strategy? Are you perhaps paying more attention to the technical aspects of your product or service and far less to how you can effectively communicate its benefits to the end customer aka “ its salability ?”
2) Ran out of Cash = Sales. Your business will not succeed unless you are able to attract customers. Cash flow is vital for every Startup especially for the ones without external funding. If you do not have an abundance of financial resources at your disposal then your Sales and Business Development Strategy should be at the very top of your list.
3) Get outcompeted = Sales. It goes without saying that your Salesforce should be focused highly competent and extremely competitive. This is the only way to ensure New and Repeat Business and a constant stream of Cash flow. Getting outcompeted simply means among others, that your competitors have a more effective Salesforce than you. How do you hire your Salespeople? Are you looking for Professionals that simply “ fit” the job description or for people that can truly make a difference and bring your business to the next level?
4) Poor Marketing= Sales related. Marketing paves the road for Sales and Revenue. What is your marketing strategy? How do you support your new venture amidst a highly competitive B2B environment?
5) Ignore Customers = Sales. Not much to comment here. Ignoring your customers = Grim business future. Listening to your customers and their needs and matching them with your product or service is fundamental.
Understand how to monetize your business . Organic growth is the key to Startup success. Not external funding.
Do not dwell on the mistakes of the past. Learn from them and move on because this is the only way forward.