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Here Is Why Your Startup Failed: The Top 8 Entrepreneurial Mistakes

If I could go back in time and rectify the mistake! Well, no matter the feeling of regret or loss, one can never go back in time and fix anything. 

According to the U.S. Bureau of Labor Statistics, 20% of new startups fail during the first two years of operation, and nearly half of all the businesses don’t survive past the fifth year. Every year hundreds of people repeat the same mistakes over and over. 

If your startup has failed even after listing your business on Citylocal Pro, and you are still struggling to understand what went wrong, you have landed at the right place. Studying the common reasons for startup failures will help you identify yours and most definitely help you avoid failure in the next one!

After consultation with the best growth strategists, successful small business owners, and financial experts, here is an account of the top 8 entrepreneurial mistakes made by people all over the world. As you read along, you are most likely to recognize a few of the mistakes you made.


No Market Need

For 35% of the cases, no market need was cited as the reason for start-failure. Even if you are tackling problems that are interesting to solve but there isn’t a market need for them, you are more likely to fail. If your idea isn’t strong enough to justify the price your customer is going to pay for it, the growth will dwindle a lot sooner than you expected. To be a success you must be able to make a dent in the operational efficiency. Thus the most important step is to identify your target audience and determine the market need for your product or service well ahead.

Bad Location

Starting a business at a bad location mostly turns out to be a disaster. Although there are exceptions, deciding where to locate a business plays a pivotal role in its success. You should be more careful about choosing the right location for a business because it is important for driving and retaining talent. It must not incur unnecessary real estate costs as it is the second biggest expense after the labor cost. 

A better location is where there is a network of connected businesses. This could give access to a better and bigger talent pool, regulatory bodies, and investors.

Underestimating Capital Requirements

Time and money are finite and they must be allocated strategically. Most of the businesses fail because they either underestimated capital requirements or failed to raise enough capital. Many entrepreneurs think they can get further with less. To minimize equity liquidation, they forget to factor in the unknowns. 

It’s good to be optimistic but if you only plan for the best-case scenarios, the business will not be able to withstand a minor blow. There will be setbacks and you must be financially prepared for them. And you must not create such blows for yourself by overspending.

Legal Challenges

Sometimes a startup from a simple idea can evolve into something that slides into a legal mess. In most cases, startups do not survive the massive legal challenges and fail. Start by registering your business, pick the right business entity and take full measures to protect your intellectual property. These areas are crucial for any business start-up. If not done right, they can cost you a lot of money, time, and heartache. 

A lot of entrepreneurs make the mistake of handling everything on their own. Legal matters must always be handled by a professional unless you are a business law expert yourself.   

Pricing Mistakes

When it comes to startup success, pricing is a dark art. Several case studies have highlighted the difficulty in pricing a product or service. Ideally, you have to find a balance and price a product high enough to eventually cover the costs but low enough to attract customers to your start-up. 

There comes a time when you have to consider the viability of the company. Even if you designed a business that customers love, it is hard to scale the profitability to ensure sustainability.  When the cost of production exceeds what customers can pay, the business inevitably fails.

Inefficient Work Team

Your work team is the most important capital investment. Hiring too soon or the wrong people can cost you your business. Many entrepreneurs either hired full-time employees when they could carry on the work with part-time workers or simply chose the wrong people to do the job. You need different skill sets and backgrounds for different positions. 

In the starting hire hard-working generalists and over time proceed to hire experts and specialists. But never make the mistake of hiring a generalist where you need a specialist. Let’s say you need an SEO expert who can handle all sorts of digital marketing work including listing your business at major US business directories and running marketing campaigns, don’t settle for an amateur.  

Releasing The Product Too Early Or Too Late

The time frames are pretty important in the success or failure of small businesses. One of the biggest mistakes is launching before you are completely ready to handle the business affairs. You need to ensure that you can handle new clients. Make sure your systems are in place right after you get your first customer. 

While still being able to maintain your marketing campaign, you should be able to manage payment terms and processes, contracts, and communications.

Similarly, launching too late can also be a reason for your failure. Always pay attention to market trends before launching a service or product. Remember that you need to solve problems in the right to succeed as a business.

Conflicts Among Investors

Know that investors are a lot more than financial backup. The first set of investors for your company can make or break it. They place their confidence in the business potential only based on the presented data without having any proof. Any sort of conflicts among investors or disharmony among the team can cost you your business.

Surround yourself with subject matter experts. Although you can avoid the major pitfalls but be prepared for the occasional mistakes. Manage your expectation accordingly!

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