Points in focus
- The inability to anticipate challenges lead to high failure rate for startups
- Misreading market demand, cash flow challenges, ineffective marketing, absence of USP and poor product are top contributors towards startup failure
- Demand and need centric due diligence, coupled with market research can lead to business longevity, among other factors
Every startup founder dreams of achieving business growth and longevity but only a fraction of those are able to turn it into a reality. As per The Global Startup Ecosystem Report 2022, 90% of the startups fail completely. Long-term business success is more than just hard work and luck. It requires the founders to put a lot of effort and time into planning. formulating strategies, and executing them.
Business longevity has its own benefits such as it becomes easier to get new customers the longer you have been in the market. Being around for a longer time than your competitors helps establish your company as an expert in the field.
Top 5 reasons why startups fail
While not having a competent product is a reason why startups fail, many startups despite having the best technological prowess and software design are unable to make it after the first year. Here are a few reasons why startups find it difficult to achieve business longevity.
Misreading market demand
One of the top reasons why startups struggle with business longevity is due to the inability to create products or services that the customers need. Research shows 42% of startups fail due to misreading market demand. For a long time, businesses have created solutions based on their understanding with a push force to customers without any market mapping. This leads to a lack of sustainable revenue generation because a compelling market demand for such a solution doesn’t exist.
Shortage of cash
Expecting a startup to be profitable from day one is a misconception that needs to be managed. Startup founders often struggle with cash flow challenges within a couple of years or even months at times, pushing longevity away. 29% of startups fail due to running out of funding and personal money. This not only highlights the lack of funds, but also the inability to manage them efficiently.
Even if the product is created based on market need, that doesn’t guarantee success and sustainable revenue. The simple reason here is that your product also needs to reach the right captive audience, failing which the sales are unlikely to soar. Here, ineffective marketing is at play. According to research, 22% of startups that fail don’t have a sound marketing strategy. This could include the inability to market it to the right audience or the inability to market it in the right way which the audience most commonly uses or understands. At the same time, insufficient marketing also leads to startup failure.
Absence of a differentiator
Another common factor preventing business longevity is the absence of a differentiator or the inability to create a unique value proposition. With cut throat competition today, customers have a plethora of choices to address their needs. Thus, if a startup is unable to differentiate itself from others in the market, longevity becomes a challenge. Furthermore, many startups fail due to the absence of a clear USP or what makes them stand out.
Finally, a poor product or tech related issues also contribute to the business longevity struggle for startups. There are two facets to this. On the one hand, a poor UI/UX can lead to poor experience. On the other hand, related factors like lack of cybersecurity or vulnerability to threats can lead to startup failure. In fact, 6% of startup failures are due to tech-related problems, including poor cyber security and outdated solutions.
Keys to business longevity
Startups that are able to identify and address the above mentioned failure vulnerabilities have a greater chance of achieving business longevity than those that overlook them. Fortunately, there are ways to anticipate these challenges and address them preemptively. A few best practices are as follows:
Facilitate demand & need centric due diligence
Startups need to ensure product-market fit. The idea is to decide the target audience early on and then perform need centric due diligence to ensure there is a compelling demand for the solution. Market surveys, customer insights, etc. are all very important. For a B2B solution, startups should partner with organizations that directly deal with OEMs and other businesses to get first hand insights and build a need pipeline early on.
Focus on customer centricity
Second, the compelling need must be supplemented with customer centricity. While the demand is there, startups also need to ensure that the solution is customer centric and provides an exemplary experience to the customers. The market demand must be aligned with customer expectations of how they seek the demand to be met.
Ensure continual product improvement
Having a solid product that ticks all the boxes in the beginning is a good starting point. However, without continual improvement, it can be extremely difficult to sustain in the longer run. With new technologies coming to the forefront and changing customer expectations, it is very important for startups to remain agile and improve their offerings and experiences along the way.
Build a strong board of advisors
Having an experienced and seasoned board of advisors is integral for business longevity for startups. Being mentored and guided by industry experts brings in new perspectives to deal with challenges and adopt a forward looking approach, moving beyond a myopic view of the startup vision. They can further help startups make the right connections, networks and navigate the entrepreneurial journey.
Undertake fiscal management
Fiscal management or managing cash flows is imperative for business longevity. Fiscal management is not only about having a lot of funds, but actually managing them effectively for long term success. A proper financial plan needs to be in place with expenses and budget for the next five years and possible sources of revenue. Resource allocation needs to focus on maximizing the return on investment for startups that don’t want to run out of cash.
Build a competitive advantage
Finally, startups need to focus on building a competitive advantage. They need to build a narrative and USP that differentiates them from the competition in the market, to become the preferred choice for customers.
How StrategINK enables business longevity
With years of experience in facilitating business innovation and go-to-strategy, StrategINK is uniquely positioned to enable startups achieve business longevity with its Startup Pulse. Becoming a part of this ecosystem will help startups with:
- Support to build a robust GTM strategy
- Expert led market research to understand buyer sentiments and ensure product-market fit
- Boosting visibility at events/conferences and via exclusive editorial features
- Facilitating connect with OEMs and other technology leaders
- Catalyzing strategic partnerships and alliances with CXOs, mentors, advisors
Reach out to us at firstname.lastname@example.org to know about how you can achieve business longevity by leveraging market activation with StrategINK.