5 lesser known reasons start-ups fail

By Megan Graham. Published at Sep 12, 2017, in Features

If you’re interested in small business and entrepreneurship, there’s little doubt you would’ve read articles about why startups fail.

Let’s be honest, the articles often repeat the same couple of points over and over. Typically, they’ll list factors including misjudging the size of the market, running out of cash, not coping with rapid growth, competition swooping in and stealing customers, or a company producing a product that’s just not very good.

At times, these articles act as an important reality check. We certainly shouldn’t discount their value, especially when you consider failure rates: 75-90 per cent of start-ups fail in the first few years.

The downside of these cautionary tales is that they can deliver a heavy disincentive for all but the bravest and most entrepreneurial among us. On top of that, they also become a bit cliché.

So rather than covering old ground, this article looks to lesser-known reasons behind those nasty startup tailspins.

Technical chaos

Poor hardware, bad internet connections, and inadequate software systems can impact multiple areas of your business, most notably vital communication channels.

The ability to communicate directly and reliably with a client is crucial to your business. However mixed messages can be a client killer. If your messaging comes across as confused or conflicting, it is unlikely you’ll see the client again.

The key is to ensure your internal communication channels such as Slack, Skype or Salesforce are efficient, especially if you are separated from work colleagues working on the same contracts.

Likewise, be aware of the capabilities of your communications tools. A Skype or Zoom call that is patchy is unprofessional, as are emails that get lost, servers that go down or a cloud system that causes huge delays in client response.

Looking internally, the potential loss of data can be a huge productivity killer, not to mention lost morale – staff who lose hours of work are not going to be happy staff.

When looking at the technology that will support your startup, it’s not always about having the newest or fanciest tools, but ensuring that what you do have is reliable.

Burn out

American inventor and entrepreneur Lori Greiner once said, “entrepreneurs are willing to work 80 hours a week to avoid working 40 hours a week.”

The darker side of the joke is the propensity for small company owners to work ridiculous hours and neglect cornerstones of self-care such as adequate rest time, sleep or holidays.

It’s not just the amount of consecutive hours, or days, of work but the stressful nature of the work, which often involves high stakes and constant multi-tasking.

The interesting thing here is that not only does the individual become physically and mentally drained, resulting in poorer decision-making, inefficiency, and a warped sense of reality, it also leads them to lose sight of the reasons they created the business in the first place. Putting in long hours without passion is the fast-track to misery.

Burnout doesn’t have to destroy a person or a business. Taking a step back and reconnecting with the self is vital to getting into a healthier state, and reigniting the passion that started it all.

Poor location

Location plays an enormous role in the success of a business.

It’s not just general accessibility – like being close to public transport, or having adequate parking – it’s also the types of businesses and people who share the same area and what that might say about your business.

For example, a new tech startup operating out of a building in a highly industrialised district might save some rent money upfront. Those costs, though, might be felt in other ways, like sending the wrong message to would-be customers.

It might be tempting to start small and go for the cheapest rent you can find. Just remember that not only will you need to first attract customers to your service or product, you’ll have to work harder to get them through the doors if you’re in an inconvenient, or undesirable, area.

If you run a purely online business with no need for facetime with clients or customers, you can probably relax on this point. Everyone else? Three words: location, location, location.

Team disharmony

You’ve probably been inundated with information from experts on the importance of workplace culture, including definitions of harassment and bullying.

There is a lot for startup founders to consider and they must take a proactive ongoing approach to ensure certain issues do not corrode the overall culture.

There are important considerations to be made: should cultural/ behavioural measures be enforced by management, or should greater autonomy be given to employees to proactively shape the culture they want? Is the approach all about reward and recognition, incentivisation schemes, or having a sturdy set of policies and procedures to protect the needs and wellbeing of staff when things inevitably go wrong?

What perhaps many startup founders fail to take into account is just how proactive they need to be in maintaining a positive, creative and supportive culture. Free lunches are great – but setting up regular opportunities for staff to raise issues in a supportive setting, or creating avenues for collaborative problem-solving, is just as crucial if not more so. Employees need to feel that they can contribute to the direction of their own role but also the organisation as a whole.

A big part of this is being careful when recruiting new staff, particularly as a startup experiencing rapid growth. All appointments should reinforce the company culture you want, not jeopardise it.

It could be worse

If you have started a business and want to keep on top of potential factors that could sink your dreams, keeping mindful of the above could be the difference between a rough patch and a total nosedive.

Alternatively, if you’re just after an ego boost to make you feel better about your own startup woes, there’s always this Gizmodo article to see how much worse you could be doing. (Unless, of course, you feature in it – in which case, probably no amount of ‘what not to do’ articles are going to help you. Sorry.)

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