Why do Most Startups fail?
1 in 10. That’s the proportion of Startups that fail to see their 10th birthday. Why do most Startups in Africa and around the world fail?
Experts and pundits have proposed several reasons.
Paul Graham a serial entrepreneur, and founder of Y combinator, insists that the biggest reason why startups fail is that they make products people don’t want, and often fail to try hard enough.
However, Eric Ries, author of the Lean Startup methodology asserts that entrepreneurship is a valuable skill that can be learned by anyone with grit and will.
Why reinvent the wheel when you can model what other successful people have done, to achieve the levels of business success you seek?
Most startups in Africa don’t live up to their 10th birthday and some of those that do, are struggling because of the following reasons.
- Lack Of Important Business Skills and knowledge.
Certain critical and important skills are needed for everyone business/organization to succeed.
Many Africans invest in businesses of which they have shallow knowledge Or employ people who lack the appropriate skills and knowledge to run and manage these businesses. This will subsequently lead to their failure as their employees will be unproductive.
- Lack Of Finance/Capital
Having the right skills is not sufficient for a business to succeed. Some startups lack the appropriate financing that they need to scale, improve their business and products, pay taxes, pay employees and shareholders, and buy new technologies and machinery.
- Poor Market Research
According to hotjar.com, “Market research (or marketing research) is any set of techniques used to gather information and better understand a company’s target market.
Businesses use this information to design better products, improve user experience, and craft a marketing strategy that attracts quality leads and improves conversion rates.”
When the market is poorly done or not done at all, businesses will have a shallow understanding of their target market, design the wrong products, and craft the wrong Marketing Strategy which will not meet customers’ needs and hence failure.
- Poor Marketing Strategy
Having the right product and being in the right market is not sufficient to succeed as a startup. The ability to perform a perfect marketing campaign is very important for the success of every startup.
Most African startup is underperforming when it comes to marketing, poor marketing will lead to poor sales which will subsequently lead to low income and hence failure.
- Poor Management Skills
According to Masterstart, “Business management involves the supervision, organization, and coordination of business resources and operations to achieve specific objectives. “
Most African startups have a big problem when it comes to business management and as a result, they fail to attain important business objectives, manage their resources poorly, and have inadequate staff control.
This will lead to underproductivity, and client dissatisfaction which will subsequently lead to business failure.
- Taxation and legality.
Some African countries have elevated tax rate on businesses, and most startups in their early days does not produce enough capital which can permits them to pay this high taxes.
Some countries also have laws that does not favour startups in their early days of businesses.
When a business is not equipped enough to be able to stands these rules, they will subsequently fail.
- Poor Teamwork
The success of a business is greatly influenced by the teams that runs it. A business that’s made up of a team where team members have different view points and believe will not stand.
Most African startup fail not because of lack of finance or technology but because of poor teamwork.
- Stickiness To The Status Quo.
Many business a a result of the success they have experience through a particular technology, business model and strategy, become blinded by this and fails to see greater opportunity provided by new technologies.
Some business executive lacks the habits of continuous learning, which make them to be ignorant of more perfoming business model used by competitors and hence sudden death as they will be dominated by their competitors.
- Marketplace Disruption
Some startup in Africa fails as a result of market disruption by new technologies, business model and strategies.
These are normally startup that don’t have enough capital to purchase these new technologies or are blinded by past success.
Some types of businesses are full of competition. Startups that are not rooted or equipped enough in all domains to stand this competition, will end up failing or closing.