21% of Startups Fail in the First Year. Why?

It wasn’t long ago when starting a business meant millions in investment, decades of corporate experience, knowing the inside-out of running a company, and whatnot.

Times have changed. Now a startup doesn’t have to be a never-done-before thing or a heavy investment. It can be as small as selling customized notebooks or a mobile app for something you otherwise do manually, let’s say ordering groceries.

The last decade has been all about technology-driven startups and an inclination towards entrepreneurship. Gone are the days when the youth was after public sector jobs. Gen Z loves the flexibility, freedom, and authority that come with having a startup of your own.

Do we not dream of being our own boss?

But. 21% of startups fail in the first year and 30% in the second – and that sucks. I have seen a lot of startups fail in the last few years. I am sure you have too.

Blame it on the economic crisis or whatever you want to blame it on, but just recently a bunch of startups halted their operations in Pakistan. Startups that we thought were doing well.

If you are planning a startup, you need to be okay with falling and failing.

Is there a recipe for startup success? Nah. But of course, we have a checklist of mistakes that can lead to startup failures.

Just check for these before you go all in.

What can possibly cause your startup to fail?

Overestimating the Product ‘Need’

It sounds amazing to think that everyone would want your product or service. But that assumption can be the biggest reason for your failure.

Let’s go back to Marketing 101. You have to dig deeper to identify who would use your product. And that’s what we keep telling our clients too.

Daydreaming about ‘We have such a good product. Getting 5000 leads shouldn’t be a problem.” won’t do you any good.

Do you have to launch a product that a lot of people want? No. But overestimating the need would only disrupt your business plan.

Launching at the ‘Wrong Time’

The timing has to be right. The market has to be ready and willing for your product or service. We know that it has been said a thousand times, but the timing, more than anything else, has to be right.

What good is launching a tech product when the landscape does not support it? Of course, launching a new product involves some risks. The first-mover advantage comes with challenges too.

A lot of external factors play a key role in the success of your product or service. You could have an amazing, absolutely amazing product, but that is NOT enough.

You gotta look at the market trends, audience willingness, economic conditions, potential competitors, alternate products, and more.

Just don’t launch without considering the external impact.

Not Having a ‘Winner’ Team

And this applies to the partnership also. Often problems between the partners lead to the dissolving of the business. You definitely don’t want to risk that.

Also, make sure you have a competent team on board, a team that aligns with your business goals, style of work, and vision.

We know that you don’t want to spend too much, but that shouldn’t mean hiring newbies for your work. Some job roles require experts, so don’t shy away from hiring experienced resources.

It’s not worth risking your startup with an inexperienced team.

‘Flawed’ Revenue Model

You gotta have a clear and sustainable revenue model – and of course a diverse revenue model. Depending on one channel means having all eggs in one basket and that’s never a good idea.

Don’t depend on running ads only to get sales. Don’t depend on discounts to attract the audience. Focus on creating value for your products and services.

And if your product is good, fit for the market, launched at the right time, and marketed well, you have a high chance of getting through.

And don’t forget to keep a close eye on the ever-changing trends in the industry. Don’t underestimate the potential of new entrants and better alternatives.

A few months of hitting sales targets definitely do not guarantee success.

Pro Tip: Never get comfortable with your progress.

Tayaba Aslam
Tayaba Aslam
Tayaba Aslam is the Content Strategist at rad.