When so many new startups fail, how do you beat those odds? We’ve all heard the statistics about the rate at which startups fail. Bloomberg state that 8 out 10 startups fail in their first 18 months. More alarming than that, 9 out of every 10 internet and tech startups fail in just the first 120 days. Failure is a reality of startup life. And if you make it past those initial 120 days it doesn’t get much better with 50% of new businesses failing in the first five years.
And yet that doesn’t stop so many entrepreneurs going to market with their latest idea. Hope is often the major factor here. Hope that your startup will be the one that survives against all these odds and becomes the next ‘Uber for X’ in your chosen market.
At Stratability, we embrace these statistics. Yes, businesses fail, but by looking at why they fail we are in a unique position to see how to build a business that has the DNA to succeed. After all, the consequences of failure aren’t often talked about. As well as the obvious financial losses that founders and the economy incur, small business failure means lost opportunities for everyone involved. Many hours of hard work by founders and employees as well as millions in funds from owners and investors is lost every year.
Our team at Stratability, interviewed several founders and employees of failed startups in the past 3 months to find out what they think the problems were. NB: We are not able to provide names due to obvious non-disclosure agreements signed by many of the people we have interviewed.
The most popular responses were centered around the vision and strategy of the business:
“The founders couldn’t agree on the vision. They kept disagreeing and it was never clear what the goals were.”
“We didn’t really have a strategy. Nobody knew what we were supposed to do but we kept doing lots of different things.”
“We didn’t really have a product yet, let alone a unique offering. There was just a random idea and we didn’t know how to execute.”
“We ran out of money. But we were burning money because we didn’t know how to use it properly. We weren’t thinking and there was no plan.”
Why do Businesses Fail?
So let’s start at the beginning: why do businesses fail? At Stratability, we believe it comes down to three things; poor execution, no strategy and bad planning. Let’s look at each of those in turn.
Many founders start their business with a new idea but never take the time to test that idea within the market they have chosen. If your product or idea isn’t serving the market need then it won’t take long for the cracks to start to show.
Taking time to look at the market that you want to launch in is a major key to putting together a successful strategy. Is your idea unique, giving it strategic positioning. Does it solve the customers’ problems? What about the competition? Is it expensive to setup, are there any profits to be made….. the list goes on…
Many startup founders are new to business. This doesn’t mean that they won’t succeed but it does mean that looking in detail at how to allocate resources and money might not be top of their list. Running out of cash too fast or not having the money to invest in the core offering of the business happens often and doesn’t bode well for the future. Poor execution leads to waste. Ultimately, waste blocks new opportunities and innovation.
Having hit upon an idea, many entrepreneurs think their first challenge is to get their product or service to market. Most entrepreneurs don’t even think about a plan, until they start to look for investors. There is a huge difference between the business plan you need to attract investors versus an activity plan to organise yourself and your team. Your activity plan will make sure you are doing the right things, at the right time, aligned to the ultimate goals of your business. Lack of planning leads to poor execution. An activity plan could help the business to build the right foundations, but often this is forgotten.
How Can Business Shaping Help You?
Time spent planning your business and journey to success will give you a solid foundation from which to beat any of the statistics we started this article with.
Business Shaping enables the formulation of strategies and tactics together with an implementation plan that can turn a vision and business goals into reality. With Business Shaping, a business can improve its chance of success as it travels through the stages of THE STRATEGY JOURNEY®.
In her soon to be launched book (expected in 2017), our cofounder Julie Choo outlines the five stages in THE STRATEGY JOURNEY® and how large and small organisations can traverse the stages as they start, build, grow, change and evolve.
In our next blog (as part of the Business Shaping series), Julie will walk through each stage of THE STRATEGY JOURNEY®, and explain how, by understanding them and exercising Business Shaping, you traverse the 5 stages. You can empower your business to come out on top and win, creating many forms of business success, instead of failing.
This blog is a sneak peek of some of the content in THE STRATEGY JOURNEY® book scheduled to launch on Amazon in November 2018! The book was successfully pre-funded on Kickstarter with 100s of copies pre-sold.
In upcoming blogs, Julie and community members will be providing much more detail on THE STRATEGY JOURNEY and including their own business and personal experiences, so tune in to stay up to date.
With a background in high-value fundraising events for a national charity, Laura is now an experienced writer and research specialist – including being the lead researcher for THE STRATEGY JOURNEY book. She brings the Customer Journey to life through blogs, content and social media to give SMEs and startups an edge when it comes to building their online communities. She writes on tech, business and strategy as well as sharing her passion for running, baking, thrifting and her allotment with her audience on Instagram.