The startup failure rate statistic that everyone quotes (nine out of 10 businesses fail) comes from a Harvard Business School study led by Shikhar Ghosh. The statistic is actually 75% of businesses, but the point comes across loud and clear. Most startups will fail. The real insight is to understand why they fail so that if you are trying to start a business, you do not fall in this unfortunate category.
Let’s drill down into the myths around startup failure, get the statistics right, and showcase the mistakes that many startup businesses make and how to avoid them.
Your industry may be different from your neighbor’s startup, and your business may be unique within its field, but your situation is the same. There are common threads linking all failed startups, and there are commonalities linking all successful startups. A relatively recent study from Statistic Brain, Startup Business Failure Rate by Industry, lists these common threads more succinctly than perhaps any study before it.
Statistic Brain tells us that business failure comes from the following seven shortcomings:
- No focus
- No motivation
- An excess of pride
- The wrong mentorship
- Bad advice
- A shortage of domain specific business knowledge
- Putting the venture capitalist cart before the horse
Basically, if you can avoid the seven deadly sins, you have an excellent chance of creating a successful startup.
The Definition of Success
But what exactly is the definition of success? How long do you have to avoid these mistakes before you are considered established instead of a startup business? These answers are difficult to define unless you have a real vision for your company before you begin calling yourself a business. It is within this perspective that we find the common thread between all successful businesses although their mission statements may be quite different from one another.
According to Foundr, your best bet as a new businessperson is to see what has been successful in the recent past. However, you should not try to directly copy anything that you see. Every success requires a bit of translation – you need to know why you would fail in the same place if you did the exact same things. Understanding when to follow and when to break away from tradition is the magic bullet that will drive a startup business into a successful place.
The Details of Success
Once you have your vision in tow and a buy in from all of your decision-makers, it is time to drill down into the details. The day-to-day efforts that you put forward must be informed by the vision that you set in the beginning of the process. Otherwise, you can have all of the technical expertise in the world and still fail.
It is essential that you keep up with the Joneses in terms of your outreach as well. Once you have solidified your supply chain, you need to let the public know with a marketing campaign that matches your internal fortitude. There are very few ways to do this without domain-specific business knowledge in inbound marketing, social media, video production, and real-time analysis.
Business 2.0 – Rise of the Machines
Creating a success in the modern business landscape also requires that you understand how to scale. Whether you plan on executing this strategy yourself or waiting until after venture capital comes in, the plan needs to be in place. Modern scaling requires a working knowledge of automation in operations and marketing. Depending on your industry, you should also be ready to invoke AI infused strategies that include machine learning and an unbreakable philosophy of continuous improvement.
In order to compete in an industry with blue-chip market leaders, your main claim to fame must be higher rates of efficiency. In short, you need to get more productivity out of fewer resources. This is where your knack for innovation comes in, which will be the true value that your company adds to the market. Can you identify this and sell it to a C suite dweller with a 30 second elevator pitch? If not, then you have some work to do in your process or your delivery.
Although you will certainly find differences in the details, sticking to the best practices above will help you avoid the most common mistakes that startups make. Make sure to read this article for insights about what not do to as a startup. After that, have those hard-hitting meetings with your decision-makers until you figure out exactly what to do.