March 12, 2018

Top reasons startups fail

"The Ultimate Start-Up Guide: Marketing Lessons, War Stories and Hard-Won Advice … " by Tom Hogan and Carol Broadbent (Career Press, $16.99).

The authors, who've started businesses that failed and started others that succeeded, learned easy-way and hard-way lessons from their experience and that of angel investors and venture capitalists. They start by highlighting reasons that startups fail, and rightly so — if you can avoid missteps at the beginning, you'll increase the odds of success. The top reasons startups fail:

"No market need" — Just because you create something new or improved, it doesn't mean the market will embrace it. If you haven't done your homework on the "why it's needed," you won't be able to convince prospects to buy your product/service. "Need" deals with more than usability. Buyers have to make a business case that addresses affordability, scalability and smooth integration with existing operations.

"Running out of money" — Plans never go as planned. Budgets should include the costs of slippage in design, production and delivery. Slippage can be financially disastrous windows of opportunity that open and close quickly, especially with seasonal items.

"Expanding market focus too quickly" — This deals with loss of focus on the initial market "whether driven by early sales feedback or engineering desire." Efforts to "improve (save?)" the product devolve into trying to be "a lot of different things to a lot of different markets." Lack of focus creates operational and financial havoc; see "Running out of money" above.

"A founder that doesn't listen" — Many founders act like dictators by refusing to listen to what employees and market feedback tells them. Despite reality, they stick with their vision. The result: Employees bail and the business fails.

If you can address the "failure" issues in the first two chapters, the "run your business" advice in the remaining chapters will increase the odds of long-term success.

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