5 MOST COMMON REASONS WHY START-UPS FAIL
Jitendra Tanna, who has mentored several Nurture Mentees over the years and is the founder of Eternus Solutions tells you the most common reasons that come in the way of success for young fledgling companies. Watch out for these:
- Unnecessary Cost cutting
- Not choosing your co-founder well
- Failure to recognize competition
- Failure to sleep with the enemy
- Not managing money well
Reason No. 1 – Cost-cutting:
It is understandable that start-ups should not be extravagant, often I have seen entrepreneurs who tighten their fists in the wrong way and they underspend to a mindless degree. If you ask them why you are not going national, they will say I will wait for numbers to happen in one city. They do not understand that speed is the name of the game. When you are a start-up, you have to take a deep plunge and go all in, as the markets will not wait for your Pune numbers to happen and someone else will beat you to it. If you have to spend money to hire a salesperson, manufacture in larger numbers, or whatever – you have to simply spend. Always remember, growth requires money. You should not curtail growth by being lean unnecessarily, as you can be lean at a stage when you have achieved a certain level of growth. Start-ups need to understand the difference between spending when it is required and being conservative mindlessly. I feel many start-ups miss this point and rather than managing the cash flow, they control the cash flow. They scrimp and scrounge, and the payback is a lack of growth.
Reason No. 2 – Not Choosing your co-founder well:
Never forget, co-founders are the key to success. In general, people tie-up with friends or family to start a business. But to make your company successful, you need to have a co-founder who complements your skill sets, who is emotionally stable. Together you must be a powerhouse. If you lack any of these, you are sure to fail. Be careful in choosing your co-founder.
Reason No. 3 – Failure to recognize competition:
I have noticed often that most start-ups think they have no competition. This is a fatal mistake. Take for example a bike-sharing company; they may not see an Ola or Uber as competition, but if these taxi services offer a 50 or 60 percent discount then a taxi ride becomes cheap and people would prefer to take a cab than hire your cycle. The same goes for an Uber, for a short two or three kilometre distance, people may not want to spend money and may be inclined to take a cycle. So even though they seem like separate markets, the competition is closely linked. Always be fully aware of the competitive landscape.
Reason No. 4 – Failure to manage money:
Money management is very important – from any standpoint, be it revenue, investment or expense. If you do not manage your money well, you are sure to fail in 12-14 months. But remember, you should neither be too extravagant nor too stingy. Remember that every rupee you spend should take you closer to your goal. So, if you are spending ₹10,000 to hire a salesperson, that should take you closer to your goal.
Reason No. 5 – Unwilling to sleep with the enemy:
As a start-up founder, sometimes it makes sense to sleep with the enemy. Do you have it in you to collaborate with your competitor, so you can grow faster? I know of two start-ups in the auto business, where one was into servicing cars and the other provided a car cleaning service. They essentially saw each other as competition. But a closer look showed that while they were both servicing the same industry, they could actually come together to do much greater business. A person servicing a car may require his car to be cleaned, and the cleaning company may notice a dent which the servicing company could fix. So one plus one could make four or five if they agreed to collaborate. They did and are now growing leaps and bounds. Sometimes sleeping with the enemy makes sense.