Start-ups fail. It’s a fact. But entrepreneurs who appreciate that always have an advantage over those that don’t. Accepting the odds are stacked against you means you take nothing for granted and look to learn from the mistakes of others.

Knowing where your start-up is most likely to falter gives you the chance to steer it through its difficult early stages and sustain momentum, giving your start-up the greatest chance of success. These are just some of the most common reasons why start-ups fail and the steps you can take to avoid them.

Poor Planning

Fail to plan, plan to fail. It’s an old adage, simple, perhaps a little trite. But that doesn’t mean it’s not true. A good entrepreneur is always ready to dive in and get things done but too much enthusiasm can leave you in the thick of the action with no clear idea of where you are going.

What you can do:

It’s pretty simple. Make a plan. It might seem obvious but many entrepreneurs leave planning until it is too late or rely on a plan that is under-developed.

Clarify each stage of your business’ development and lay out how you will get there from the previous stage. Have someone you trust, ideally someone with business experience, go over the plan with you. Get them to quiz you on every point of the plan and make sure you haven’t missed out a vital element.

Going it Alone

Solo start-ups are statistically more likely to fail compared to those founded by a partnership. Simply put, two heads are better than one. It is too easy for a solo entrepreneur to develop tunnel vision. Two sets of eyes will see a given problem from two different angles.

What you can do:

If you don’t already have a partner, seek one out. Incubators and accelerators can put you in contact with people from varied disciplines. The Digital Times provides an excellent list of incubators and accelerators, which you can view here.

It’s a good idea to have partners with different backgrounds. This gives your business a broader knowledge base and makes it more likely that questions will be asked and more effective solutions uncovered.

Customer Acquisition Cost

When a start-up reaches the customer acquisitions phase, the focus on acquisition can become so great that the cost to value ratio is often overlooked. If Customer Acquisition Costs (CAC) exceed the Customer’s Lifetime Value (CLV) then, simply put, there is no business.

What you can do:

Before you start, be conservative in your estimates of CAC. Typically CLV should be at least double CAC for a business to even be considered profitable. Be inventive in your approach to customer acquisition. Partnering with a company at a different point on the supply chain can be an inexpensive means of driving customers to your business.

In Need of a Need

Sometimes a product doesn’t quite have the market its creator imagined. Often it is only when the product is almost complete, that the gap between the need the product is supposed to fill and the reality of that need become apparent.

With some products this is not a huge problem and is very often part of the development process. Some adaptations and reworking can shape the product to fit the reality of the market.

However for some products this gap between the imagined market need and its reality is simply too great to cross. Lack of a market need is the single most frequently cited cause of start-up failure.

What you can do:

Try not to fall in love with your idea. Before you start, question your idea, break it apart. Talk to those who would be your target customers (not just friends and family!) and make sure there is a real market need. You might find that there is a need but not quite where you expected it to be. It is better to find this out before you start than after you fail.

Patrick is the digital marketing manager at Digital Skills Academy, a revolutionary digital technology educator with a proven track record in delivering high levels of successful employment outcomes for graduates. Follow Patrick on Twitter

Patrick Naughton

Patrick is the digital marketing manager at Digital Skills Academy, a revolutionary digital technology educator with a proven track record in delivering high levels of successful employment outcomes for graduates.

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