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Top 5 Reasons Why Startups Fail



Every month, a lot of startups are established but the failure rate is very high.  As of 2021, 20% of them fail within the first year, 50% fail within 5 years and 65% have to give up within 10 years. So Why do most Startups fail? Let's find out the top 5 reasons why startups fail.

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People often think of winners in startup stories, but not every startup can grow exponentially. Why do most Startups fail?

Startups are the leading business model driving innovation and economic growth around the world.  They create new categories of products and services every year.  They are creative and ambitious entrepreneurs with incredible ideas.

However, not everyone can make their dreams come true. There are a lot of startups that define as small no matter how big they seem.  Thus, in the US alone, there are 31.7 million small businesses which account for 99.9% of the total number of businesses in this country.

Top 5 Reasons Why Startups Fail
Every month, a lot of startups are established but the failure rate is very high.  As of 2021, 20% of them fail within the first year, 50% fail within 5 years and 65% have to give up within 10 years.

So Why do most Startups fail?

Let's find out the top 5 reasons why startups fail.

1- No market or misidentifying market

Too many startups just started already targeting demographics.  Next, they try to target everyone in the city or town they live in.  The goals of these startups are too broad.  The narrower the niche, the easier it is to market to the right audience.

2- Financial exhaustion

Why is the money running out? Is it because of poor cost management or because sales are not high enough?  Financial exhaustion also refers to financial inability or financial resource insufficiency needed to keep the business running, especially in the early days until the business can begin to generate profits.  

3- The team is not good enough

There are people who start a business because they need a job.  They have a vague idea of ​​what they are doing and think that because they are better than their peers at something, they should make a living doing it.  The sad truth is that without real business skills and expertise, these entrepreneurs are destined to struggle on the path they want to go.

Besides, a leader alone cannot build a successful business.  They need effective assistants, effective teams which bring growth.  But if you choose the wrong people, especially with young startups, success will be even more out of reach.

4- Fierce Competition

There is always the possibility that there are thousands of startups simultaneously targeting the same market.  Competition is key to a startup ecosystem.  Competition forces founders of startups to move faster, hire faster and make more prudent product decisions.

Top 5 Reasons Why Startups Fail

At the same time, they must also win the market for themselves today, not a year from now.  This is the reason why many startups fail when they cannot solve everything to be able to compete with competitors who know how to survive and become stronger day by day.

5- Price problem

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New entrepreneurs often set a price for their product or service by adding a cost or profit that they think they should receive.  This is an oversimplified approach and ignores important factors such as market position and the actual value of the product.

The way startups position their products greatly affects their success.  They cannot determine whether they will be a low-cost supplier to the mass market, create a high-end product at a high price, or will sell a product of good quality but at a relatively low price.

Although there are many reasons why startups are worried about building their business, if they have enough passion and faith, even though they know they may fail, they will still do it.  In fact, failure doesn't stop you from succeeding, it's a necessary step.  After having preparation and precaution against possible risks, then actually getting started can make a startup succeed and grow.

Top 5 Reasons Why Startups Fail

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