Signs Your Startup Is Destined to Fail and How to Avoid Them

Startups fail – a lot. Startup failures are common but we often hear too much about startup success as compared to failures. Ignoring failed startups is one of the biggest mistakes that we make because every failure has at least one lesson that can help other startups.

Being a startup owner, you’ve to keep your eyes wide open for any possible signs of failure. If you see any of the following signs in your startup, it means you need to take control of the situation and save your startup from potential failure.

1. You Haven’t Changed Your Business Idea

When was the last time you repositioned your product to target a different audience?

According to CB Insights analysis, 42% of startups fail due to lack of market need for their product or service. The report listed 20 top reasons why startups fail. Interestingly, no market need is at the top.

Ask yourself, are you heading in the same direction?

Is there any (real) need for your product?

The fact is, every product needs tweaking. Every business idea has to be tweaked several times before it turns out to be something appealing for the target market.

If you haven’t reconsidered your actual startup idea, it means you’re heading towards failure. Don’t stick to your original idea if it isn’t working.

Tweak it until it becomes a market need and that’d be a point where you can relax with a cup of coffee.

You can fix this issue in two ways.

1. Change your business idea altogether and switch to a market need.
2. Tweak your original idea and try making it better.

2. Don’t Have Enough Cash

The CB Insights analysis revealed that the second most common reason why startups fail is lack of funds. Some 29% startups fail because they run out of cash.

Statistics show that only 1% of all the startups are funded by venture capitalists. Remaining 99% have to manage their own funds. If your startup isn’t funded, you’ve to look for other options.

But even if your startup gets funded, there is no guarantee that it won’t fail.

Sprig, for instance, raised $56.7 million but it failed. Sprig was losing six figures a month.

Getting funded won’t take your startup too far if you don’t have the guts to utilize those funds smartly. If expenses exceed revenue and your startup is running out of cash quickly, it is a red alert.

Unfortunately, if this happens with your startup, there isn’t much you can do except getting funding or a business loan.

Here are a few quick ways to generate instant funds for your failing startup.

1. Borrow money from friends, relatives, and peers.
2. Get a small business loan to get money for your startup.
3. Partner with another business to share resources.
4. Look for side business ideas that are easier to set up and have the potential to breakeven quickly.
5. Look for crowd funding options.

3. High Employee Turnover

While most startups are run by a small team but if crucial employees leave your startup, consider yourself in deep trouble.

Over 23% of startups fail because they don’t have the right team.

There could be several reasons why employees leave your startup such as challenging jobs, low pay, unclear job description, no growth opportunities, or personal reasons.

Employee turnover isn’t bad. In fact, 10% employee turnover rate is considered healthy for your business but when it exceeds, that’s not a healthy sign.

Things get challenging when one or more critical employees leave you.

Here are a few tips on how to avoid this particular startup challenge.

1. Empower your employees.
2. Communicate and collaborate with your staff.
3. Jobs should be challenging yet achievable.
4. Pay your staff well.
5. Don’t rely too much on a few employees.
6. Focus on building a team of experts for your startup.

Conclusion

Tackle these three startup failure signs with caution. You never know what’s coming your way. Stay alert and focused.

No startup is good or bad. The way how you deal with it makes it good or bad. Don’t make yours a bad one.

This guest post was provided by Sabih Javed.  Sabih Javed is an entrepreneur and a digital marketer. He is the founder of DigitalMarketer.pk. Connect with him on Twitter.