Why Do Startups Fail? 4 Reasons Things Go Wrong

17/11/2021

Want to be an entrepreneur? Here are the pitfalls to watch out for!

Business is one of the best subjects to study at postgraduate level because it teaches you about every aspect of a commercial business, and enhances your skills in this area. So what jobs can you get with a business degree? And can you become an entrepreneur?

Our business management courses are the ideal platforms for entrepreneurs. But every aspiring business leader must be prepared for some form of failure. Dont be put off by this and remember the phrase: "I cannot fail. I can only win or learn."

Here are some of the most common startup failures, why they happen, and more importantly…how to bounce back!

1. Running out of cash

This is the number one reason many new businesses fail according to data by CB Insights. Together with the inability to raise capital, not having sufficient cash flow is a major cause of companies going into meltdown.

If you’re serious about launching a startup, knowing how to convince investors of your potential is key. You’ll need more than just a good understanding of running a business. You’ll also need to read up on Series A funding, and how to get on the right side of stakeholders.

2. Getting the market wrong

Another common reason for failure is no market need for the product or service you’re selling. When you have a great idea, access to amazing new technology or some sort of manufacturing breakthrough, it can be easy to lose sight of purpose.

But remember that in 35% of failed startups, entrepreneurs are caught up in tackling problems that are interesting, rather than problems that actually need solving. Step back and ask yourself whether your offering serves the market.

Make your product fit the market. Not the other way around!

3. Too much competition

While obsessing over competition isn’t healthy, it’s important to pay attention to your competitors. It’s always worth following your competition on social media and constantly reviewing your own offering to see if you can improve what you’re doing.

If you’re starting a business in a highly competitive market, you’ll need to work harder on building your USPs (Unique Selling Points).

4. Flawed business model

When your business model is wrong, it can put you at a disadvantage, even when your ideas or products are outstanding. For instance, sticking with one single channel instead of expanding to others, or not adapting your model as markets change, is only going to hold you back.

For startups looking to take the next step, they have to be able to make money at scale so your business model will need to grow, adapt and develop.

So is business management a good degree for entrepreneurship if failure is sometimes inevitable? While it’s true that some entrepreneurs don’t even have a degree, the right education is extremely important. The rise and fall of Theranos founder and college dropout, Elizabeth Holmes, is the perfect example of how a lack of experience and lack of a solid business grounding can lead to very bad (and fraudulent) practices.

The good news is that with an MBA (Master's of Business Administration), you’ll develop a range of useful skills in management, leadership, and general business knowledge. Even if failure comes knocking, you’ll be able to use the skills you picked up in your undergraduate and postgraduate training to come back stronger. 

To find out more about applying for a business degree or a business master’s, see our available courses.

 

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