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The Main Reasons Why Most Startups Fail in the First Year

by Brad Fein
Startups

Nowadays, it is very easy for entrepreneurs and business people to create their startup, hoping that it will turn into a highly profitable company. Some countries offer tax benefits for startups, and other programs/associations fund such startups if they are based on a fantastic idea.

As a result, the business world is pretty much riddled with startups of all types. However, according to statistics, 90% of fresh new startups fail, and less than 50% make it beyond the first year.

Let’s take a look at the main reasons why all of these startups usually fail within the first year!

Finances

Funds, as mentioned above, can be simple to obtain. Depending on the type of startup, you could even rely on some funds from parents or relatives. Still, having funds is not enough.

It is paramount that you know how and when to use them as well. Startups have to focus more on KPIs than traditional businesses. Why? Well, the startup can even fail if only one single thing doesn’t go as planned.

Hence, startup-related investments and expenses must be determined with a clear and success-focused mind!

Regulations

Entrepreneurs may also think that they know the law well enough and don’t need to consult with a lawyer when creating a startup. However, many professional law groups, such as Mills & Anderson, think otherwise!

According to them, most issues that a startup could face can be easily avoided if contracts are signed and documents drafted in the company of a professional lawyer. Since it is most often that the people with big ideas that create startups, they may forget to read the fine print and later come at a loss!

Planning

Planning
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Most startups lack planning. They often start in a garage and remain there, even after success happens. This makes them unable to use their profit for expansion and, as such, fail to experience progress.

Those in charge of the startup should plan ahead and know what will be done after reaching a particular milestone. As most startups do, they won’t grow according to their potential if they go with the flow.

Transparency

The market is full of similar products and services. As such, it can be difficult for startups to come up with a new and exciting idea. In this case, they may choose to be less transparent so that their product/service seems better than that of the opposition.

While this may ensure an excellent first year for the startup, the lack of transparency will eventually turn against them. Lack of honesty towards clients and partners will ultimately come to light, and in the worst case, put an end to the startup!

The Bottom Line

Last but not least, startups also tend to avoid engaging too much with marketing and sales. The owners think that their products/services are too good and don’t need any marketing to become famous. But this is far from correct!

Startups don’t differ too much from traditional businesses. As such, they must follow the same useful old tricks if they want to succeed!

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