Startup failures are so common that they have become a sort of mantra for entrepreneurial talk. It seems that everyone is advising budding entrepreneurs to start up a business as soon as possible. As you will learn below, the main reasons for startup failure are diverse. However, some common threads do emerge, including a lack of product-market fit, poor product-market fit, failing to make profits in the early stages, and (again) just running out of cash.
Let’s start with the bad news. Startup failures don’t just happen. The reasons that startup failures crop up all come down to a few universal factors. Of these factors, three are the most important:
All successful businesses face problems along the way. Some startup failures, unfortunately, stem from a problem related to the business itself – poor product-market fit for the business, lack of support from existing customers, etc. Others stem from issues outside of the business – poor planning, an inadequate delivery service, marketing issues, etc. Regardless of the root cause of the problem, however, Startup Failure (a shortened term to “failure to launch”) is inevitable.
But the biggest problems facing startups today come from within. In fact, they’re much like the flu: a highly contagious and deadly strain. When a business is in its early stages, it’s easy to isolate and label the failures. Those in the know call it the Snowball effect, or a “cocooning effect,” or whatever – the thing that makes Snowball a perfectly good metaphor for the startup failure process.
But in reality, as dreadful as it is to label something as “Cocooning Effect,” it’s a necessary part of the process. There will be failures along the way, but it’s also true that startup founders get better at making the big decisions that define their company and future growth. When you’re young, you have plenty of time to learn and grow. As you age, though, that decision-making process becomes more difficult. When you’re in your early twenties, you’re already past the tulip stage of life, and there’s no turning back.
Fortunately, the Snowball Effect means that startup founders – along with every single person on Earth – have plenty of time to prepare. They can read books, attend seminars, network with successful entrepreneurs, read Internet blogs about specific topics…the list goes on. They can hone their skills and get better at identifying problems, finding solutions, and defining their passions. Because, if they fail, at least they’ll have the insight and experience to look at their alternatives and come up with brilliant solutions.
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