9 Reasons behind the failure of a business start-up

Start-up is the most important stage for any business. Every entrepreneur has to face this phase to progress in a business. In most cases, the success or failure of a business start-up determines the future of that business. If a business gets proper start, then there is a high probability of success. On the other hand, a bad start can ruin a business in no time.

To make a business successful and profitable, every entrepreneur needs to know the reasons behind the failure of a business start-up, so that they can prepare themselves to avoid those causes and get a good start.

Read: Entrepreneur and entrepreneurship: 9 Things to ensure before start

What are the reasons behind the failure of a business start-up?

Depending on the nature of business, there could be many reasons behind the failure of a business start-up. But 9 reasons are common and most impactful for all types of business start-up. Those are:

1. Misconceptions about business
2. Wrong industry selection
3. Incomplete business plan
4. Unplanned budget
5. Insufficient backup fund
6. Mismanagement
7. Wrong promotional strategy
8. Inefficient workforce
9. Lack of dedication

These reasons have been described below.

1. Misconceptions about business

Before stepping into business, we must know what business is and how it works. In general, there are many misconceptions about business and the most common two are: education is not required to do business and business brings money all the time. But these are absolutely wrong thinking about business.

To make a business profitable and valuable, proper education for knowledge and ethics are the must have things for an entrepreneur. Without these, an entrepreneur or a start-up, may earn profit for a short period, but can’t sustain in the long-run. If a business fails to run for a long period of time with proper profit, then it can’t create any value toward society and economy.

Second thing is that business brings money. Answer is yes, but not all the time. Every business has profit and loss. We all know it is not possible to make all the business ventures profitable. Loss is a part of business.

So, before entering into any business, an entrepreneur must think about these.

2. Wrong industry selection

To start a business, an entrepreneur needs to select a specific field of business to move forward in. In most cases, entrepreneurs make mistakes here.

Most entrepreneurs try to start a business by quick and shortcut methods. For this matter, without doing any study or research, they choose those types of business, which remain trending at that time. This approach of selection makes a start-up baseless and visionless.

So, without a strong base and clear vision, a start-up can’t be a successful venture in future.

3. Incomplete business plan

Business plan is the key element for a new start-up. An incomplete business plan makes everything incomplete and insufficient. Without a proper plan, it is not possible to run a business successfully.

A proper business plan must consist of every detail from start to short-term mission to long-term vision. Most entrepreneurs don’t realize the importance of a proper business plan. For this reason, they don’t like to invest their time in this crucial part of a business journey and they start businesses without guidelines. As a result, it becomes impossible for them to survive in the long-run.

4. Unplanned budget

Budget is an important part of every sector including a business start-up. A budget works as the mirror of all probable inflows, outflows, and funds management.

A well-planned budget can help a start-up to grow. If a start-up comes with an unplanned budget, then it is hard to survive. In most cases, entrepreneurs don’t plan their budget in line with their business plan.

So, most of the time, they can’t manage their funds properly. As a result, they fail to make their start-up successful.

5. Insufficient backup fund

Backup fund means the fund that an entrepreneur must keep separately to use in case of any unavoidable circumstance or disaster. Most entrepreneurs don’t think much about it. But in reality, a backup fund is as important as an actual investment fund.

After having all other required elements, many business start-ups fail to survive in critical situations only because of insufficient backup funds. In recent times, many start-ups or businesses have failed to sustain in COVID-19 pandemic due to insufficient backup funds.

6. Mismanagement

Managing a business and its resources in a good manner brings efficiency in it. On the other side, any type of mismanagement can make a business inefficient.

Mismanagement occurs from lack of knowledge and irresponsible attitude. A well-managed start-up can grow big and successful in the future with a very minimum amount of investment. But mismanagement can ruin a start-up despite a large amount of investment and proper business plan.

7. Wrong promotional strategy

Promotional or marketing activities help a business start-up to reach the targeted people. These activities work as a bridge of message between a business and its consumers.

Many entrepreneurs just cannot decide what would be the right message and strategy from their start-up to their targeted people to convert them into consumers. Many times, entrepreneurs apply wrong marketing or promotional strategies with meaningless messages to attract people. As a result, they failed to convince people to become consumers of their products or services.

Besides this, many entrepreneurs don’t like to spend money to do promotional activities. For this reason, they can’t reach people to introduce their start-ups. If people are unaware about a start-up, then it is hard to grow.

8. Inefficient workforce

Business always highly depends on its workforce. No matter, it is a start-up or an established business. A well-managed established business can fall rapidly if they don’t have an efficient workforce.

For a start-up, it is even worse. An inefficient workforce pushes a start-up downward by wasting time and resources.

9. Lack of dedication

Many business start-ups failed to grow only for the lack of dedication from respective entrepreneurs, or related people. If an entrepreneur or workforce failed to be dedicated toward a start-up as per requirement, then it is not possible to make that start-up sustainable.

Many times, an entrepreneur starts a business without proper knowledge and self-interest, only by following others or trends. This makes an entrepreneur indifferent toward the start-up after some time. As a result, the start-up falls down quickly.

In final note, a business start-up carries dreams of an entrepreneur and many others. When a start-up fails to grow, it impacts negatively on related people. It destroys the dreams of many. To keep a start-up away from failure, every entrepreneur must keep in mind the above mentioned reasons before starting any business.