As an entrepreneur, I'm familiar with the concept of failure. I've made mistakes in the past; some are big blunders. At the same time, however, I've been lucky enough to be successful on several occasions. Along the journey, I've understood some of the lesser-known reasons for start-up failure and, more significantly, why a few flourish, says Pavan Reddy Appakonda, an Indian entrepreneur, software engineer, and investor.
India has the third-largest start-up environment in the world. As a result, it takes a significant amount of effort for a business to break into the market. However, we can see how Indian companies fail at a higher rate than any other country.
India is still a developing country, but the government is coming up with big names like "Vocal for Local" and "Made in India". It could be the ideal opportunity to take a shot. But first, let us examine why Indian companies fail at such a high rate. Last week, I talked with a couple of start-up Founders, we discussed different reasons for the failures.
Wrong Market
Too many people attempt to establish a business to reach everyone as customers. This is not going to turn out nicely. Following that, they try to target everyone in their town. Once again, the scope is too broad. Your niche will be easier to market to if you narrow it down even more.
Inadequate Research
Entrepreneurs must understand the needs of their target market. Too many would-be entrepreneurs enter the market believing that they have superior service or product, only to discover that no one is interested in their service or product. They will know precisely how to address the wants of their potential clients if they have done their homework and researched their market thoroughly.
Market shifts
People who start a business sometimes have a good idea of the market, but then the market changes before they have time to adapt to those changes. The coronavirus pandemic was a great example of how the market changed, making many businesses struggle or fail. Shutdowns and capacity restrictions made many companies and restaurants lose a lot of business, and it took a long time for some customers to feel safe enough to come back.
Failure of a business concept
A strong product, an eye-catching website, and hefty advertising budgets—many entrepreneurs believe that these qualities will be sufficient to attract clients and business. However, attracting new customers and retaining existing ones are expensive endeavours, and start-ups must have a failsafe business plan to succeed.
Leadership gaps
The majority of start-ups are propelled forward by the vision of their founders and core team members. On the other hand, having a solid idea is considerably less critical than knowing how to lead a brand, a company, and a team. Another frequent factor for start-ups failure is a lack of vision and effective leadership.
Bad Partnership
A business partner is frequently required when launching a new company. One of you knows a lot about one thing, and there's another who knows plenty about something else. Internal discord will ensue if you disagree on how to proceed with the company. Your partner feels they are working harder than you, even though you are working more. Due to the failure of the cooperation, the company is eventually shut down. You may avoid most disagreements by establishing a clear company strategy that lays out the responsibilities of each partner.
Problems with finances
Another common reason for start-up failure is a lack of funding. Investors and venture capitalists fund most businesses until their product or service generates revenue. If that does not happen quickly enough, investors often baulk at continuing to invest in it.
If the start-up fails to secure additional money as the old capital runs out, it will soon find itself unable to meet operating expenses. Cash flow issues are a significant cause of start-up failure. Even if investors don't leave, new enterprises can fail if they don't match client needs or charge too much or too little.
Incapability to grow from blunders
There will be errors, miscalculations, and failures in any start-up. Most start-ups have numerous ups and downs on their journey to success. Start-ups often fail because they cannot learn from their mistakes and modify their strategy to become more successful.
Ignoring clients
Often, start-up founders have too much on their plate. They have to deal with funding, hiring new employees, managing the whole company, etc. Customers may not even be on their lists of things to do. Many people don't think about this, which can be the root of many start-up failures.
Loss of enthusiasm towards the venture
Many business founders have a short attention span: they fall in love with a concept but are tired of it before it reaches its full potential. A start-up’s leadership will fail if they lose passion for the idea or product too early. For example, founders can sell their start-up to someone else to run with it or incorporate it into their vision. Sadly, few entrepreneurs who lose their passion ever regain it. Many business founders' creative and restless temperament has long been a factor in start-up failure.
Pavan says, around nine out of ten firms fail. That is a prominent figure, showing that numerous factors must align for a business to prosper. There are thousands of start-ups in India, and some will succeed in the following years. Any start-up with a creative idea, thorough research, and capable leaders may succeed anywhere globally.
