Startup failure rate up by 42% in Australia
New businesses spring up at incredible degrees every other month, but things are not all rosy with small businesses as of late. A recently published report by leading credit reporting agency Dun & Bradstreet shows an alarming 42 percent rise in failure rate across the nationwide startup sector. According to the report, nearly 62,073 ventures opened in the 3rd quarter of 2016, but the rate of failure measured high around 50 percent compared to that of the second quarter. Reasons vary, from lack of understanding of the market, to acts of ignoring customer concerns, to inadequate funding and a lot more.
So what are the vital factors shoving down these startups to nowhere? What are the real solutions that can actually prevent such grim fate?
Lack of idea on market need
According to a recent Fortune survey, 42% of startup founders cited lack of market need as the #1 reason behind the failure of startups. New entrepreneurs are at times too drunk on “disruptive” ideas to realize that end-users are not actually ready for innovations. Remember how even Google had to withdraw its too edgy Google Glass after a few months of launch because the audience was not ready for it? The search engine giant can afford wasting billions in a futile experiment, but startups don’t exactly have such fiscal muscle.
So it is always smarter to get an in-depth survey on the market and potential end-users. Would they actually use it now? Are they going to pay for it? Would it make their lives easier today or in the near future? If the service appears to be made for a faraway Tomorrowland, it might be better to skip the project for now. The bottom-line: make sure the ideas are not only “unique” but also practical and relevant to the contemporary era.
Capital issues
It is no secret that startups are often short on capital. Monetary issues account for a failure rate of around 29%. Underfunding could mean serious problems such as not being able to hire the right talent or invest in standard equipment to step up in the competition.
"It’s wiser to wait for adequate funding than to launch a half-baked version of an otherwise promising venture. It’s because once you are in the market, you are expected to ‘deliver,’ which is not possible if you don’t have the funding to afford quality talents or standard production," stated well-known business coach Trevor McClintock.
The irony is, overfunding can also cause problems. The ease to splurge can delude startups to launch experimental ventures without calculating the risk, which, if it backfires, can push the venture to bankruptcy in no time.
A startup should not only observe careful and sufficient funding before launch. It should also be meticulous on the allocation of funds in the proper places.
Not understanding customer perspectives
A startup would fail big time if it does not care about standing in the customers’ shoes before launching a product or service. It is all about having the taste of one’s own syrup before it is offered to another. Would one trust a web designer whose own website is substandard? Certainly not. Unless the product is tested by the consumers themselves, one will never have an exact idea regarding its quality. They may have the theories right, but what looks great on paper might not be that sweet in practice.
Startups always need to get a thorough assessment of their own products from the customers’ perspective before the official launch. The assessment might point out scopes of improvement, which will later on translate into a winning response from the audience.
Lack of passion in the idea
A startup is bound to sink if the motive is all about making cash. If the entrepreneur is not passionate about ideas, how will he motivate users towards it? Launching a startup means spending 18-20 hours of work per day, at least in the initial couple of years. Drafting the business map, managing the talent pool, hiring accounts to negotiate with vendors and writing the sales pitch – there are so many tasks at hand. Where does one acquire the strength to work if he himself does not believe in his pitch?
It feels great to be one’s own boss. However, one has to believe in his own ideas to make the world believe in return.
