reasons most startups fail

Why do so many startups fail? Have you ever wondered about that? While going to buy grocery one day, I noticed that a particular retail business that was obviously doing well a few years ago had closed up. As I wondered about what could have happened, I equally saw about two more retail businesses close to it that have equally packed up.

I am sure you must have seen something similar right where you live. It is almost like a trend. A business starts, and in a couple of months, it closes up. Worse still, there is even a statistic attached to it which tries to prove that 90% of all businesses fail within the first five years.

I have thought about this for some time because I equally own a couple of startups, and I definitely don’t want to be a part of that statistics. I guess you don’t too.

Well, I was able to get a couple of answers. So if you are still wondering why so many startups fail even before they ever get to start, I will give you six major reasons. They are not exhaustive, but here goes:

  1. The owner employed people he knew, instead of the most qualified hands

Many startups are small businesses. It is quite understandable that the owner would like to have a close knit family. And he does this by employing people who are referred to him by close allies, friends, or family members.

For most people, the reason behind this is that they want people who they can trust, people who won’t steal from the company.

Unfortunately, this decision ends up being a wrong one. Why? As a startup, you need the most qualified hands you can get. Else, they will still run down your business without having to steal from you.

2. Many Startups fail because the owner runs out of money

reasons most startups fail, run out of money

If you are starting out as a business owner, try and set money aside to cover running cost for a minimum of one year. This should include the money that will handle workers’ salary, recurring expenditure and the rest. The idea is to make sure that the business stays afloat whether it makes any profit in the first one year or not.

And in reality, most businesses never get to rake-in the millions until a few years later.

But do your best not to borrow a lot of money because of this. It is always better to start without that gloomy feeling that comes with knowing that you owe a bank or a loan shark a lot of money. And the good news is that there are a couple of unconventional ways you can raise money for your business without taking a loan.

But if there’s need to borrow at all, make sure it is minimal.

3. Many Startups fail because the CEOs don’t take adequate rest and break down

When I started my consumer goods retail business, I put my all into it. I forgot I even needed to rest. And on many occasions, I totally forgot how important it was to eat well, or even to get a good night’s sleep. All I could think of was what to do to make my business grow, beat the competition, and bring in a lot of profit as soon as possible.

I succeeded in doing that. But it cost me my health temporarily. Yeah, I broke down one of those days. I mean, I had it coming. I was working insanely hard, but I was not being smart about it.

reasons most startups fail, the CEOs don't rest

Take a break before you break down

Thankfully I learnt my lessons as soon as I recovered. I applied a lot of changes in my lifestyle and it helped my business in the long run.

Just like me, most entrepreneurs start their businesses with a lot of enthusiasm and drive. This propels them to work hours unending trying to drive their startups to success. It is great, and I understand the feeling.

But there should be a balance, because if you break down along the line, your business will most likely follow suit.

4. Many startups fail because the CEOs don’t update what they know

At a time last year, I started feeling empty. I was running out of ideas fast. I knew I was not being innovative anymore. And the reason was because I had no new knowledge to consult. I had a lot of books in my library, but I kept procrastinating on when I will get around to reading them.

One day I had to sit down, and make out time for it. Almost immediately, I noticed tremendous changes in my startup.

Do you have a similar experience? You should do something about it because the competition is getting tougher every day, and an investment in continuous learning is one major way to ensure that even if most startups fail after a few years, yours will not be part of the statistics.

reasons most startups fail, update


Invest in continuous learning if you don’t want your startup to fail. Take up part time courses. Better still; explore some of the free education resources that are available online.

5. Many startups fail because of Poor marketing strategies.

Many startups don’t have any clue on how to market themselves or their products to prospective customers. Well, if you don’t invest in a good marketing strategy, how then do you expect customers to get to know about your business?

And if you don’t get customers…well, let’s just say your startup will fail before it starts.

6. Many startups fail because the CEOs are in business for money and not for passion.

Every entrepreneur wants to make money, I know. But if the main reason you are starting that business is to make a killing, and not because you love what you are doing, then it is just a matter of time before you lose interest. And once that happens, the business will go down.

Starting a business is a daunting task. But more daunting is trying to make sure that your business stays in business. Avoid these mistakes that make many startups to fail, and watch your startup cross that 5-year business failure mark.