Why Do So Many Startups Fail?
So, I’m trudging down the hall of “Acme Hotel” at 11pm on Thanksgiving night with my family and our luggage. I drove five hours to get to Thanksgiving dinner, I ate and drank quite a bit (driver was sober- not to worry), and all of us just wanted to go to bed.
I noticed some smashed chips on the floor of the hall- they looked like Doritos, I thought. We enter the hotel room and my son pulls the folding bed out of the couch.
And there’s a small pile of chips in the bed.
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After cringing, the front desk asked us to come down and get a vacuum- seems that no one else was available to clean it up.
The next day, we got the night’s stay comp’d for free, but I’m still a little ticked off at how things were handled. Acme Hotel (actual name withheld) should have had a process in place to handle that situation- a late night housekeeper person who could help.
Clients are hard to find, service- and keep
Why do most startups fail? Here’s the main reason why:
- It’s difficult to create a product or service that people want and are willing to pay for.
- Once you find customers, it’s critical that you turn them into repeat customers. It’s simply too expensive to constantly have to find new customers.
- A bad customer experience may mean that a repeat customer- a true fan- never does business again, and tells others why they won’t do business with you.
Now, bear in mind that the hotel company in my story has been in business for decades. They have brand awareness and a nationally successful brand.
And they’re at risk of losing me as a client.
If it’s that hard for an established company, how hard is it for a startup?
Really hard.
If you’ve had a financial setback, this article may help.
The wrong people- or not enough of the right people
The right mix of people- team members who have the necessary skills to grow and manage a business- is critical. The person who creates, innovates, and promotes the product needs operations managers, finance experts- the list goes on.
The best illustration of this need for a team is explained in The E-Myth. In this book, an entrepreneur with a skill and a good idea becomes increasingly frustrated, because there is no team in place to do everything that needs to be done to manage a business.
No team, no success.
The times, they are a chang’in
Another reason why startups fail is an inability (or a lack of vision) to change when the market demands it. Rarely, if ever, does the original version of a product or service succeed as planned. A good example is Post-It notes. A chemist at 3M was initially working on a very strong adhesive, but used a weak adhesive to mark his place in a hymnal at choir practice.
A huge selling product- discovered by accident.
The key here is to find a client need, solve a problem- and be able to charge a high enough price to create a viable business.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
(email) ken@stltest.net
(website and blog) https://www.accountingaccidentally.com/
(you tube channel) kenboydstl
This post was originally posted on my Quora page.
Image: Bullseye, Jeff Turner CC by 2.0