Top 2 Reasons Startups “Fail”
Let me preface this by saying, I’m a tech startup founder. I also own a consulting company and have owned a real estate business for the past 11 years. Thus, every article I create is from the heart and from personal experience. With that said, I prefer not to use the term “fail” as I don’t believe there is failure in startups, only testing. You only fail when you give up.
When you have the courage to step out on faith and start a business of your own instead of just talking about it, you’re certainly not a failure and that term shouldn’t define you personally. Entrepreneurship is an admirable feat for anyone to choose. It’s one of the most uncertain decisions one can make, risking it all, for a chance to build something from an idea. Yes, it takes a certain level of courage and confidence to do it, but I’ve found that at some point those wells run dry. Most people have limits on how far outside of their comfort zone they’re willing to take it, particularly if it requires even more risk.
The biggest risk of all I’ve seen new entrepreneurs avoid is rejection — rejection of the new product or service they’ve built. And this leads into the first reason startups “fail” — the absence of sufficient customer discovery.
How does this happen?
Well, most founders focus on speaking with people they personally (loosely or closely) know to give them feedback on their new business idea. Typically friends, friends of friends, friends of friends of friends, and family. (Yes, I meant to type friends of friends of friends!) You see, all of these people are in some way tied to them, even if it’s a weak tie, nevertheless it’s a relational tie. However, proper customer discovery should be done by speaking with complete strangers — people you don’t know and who have no problem hurting your feelings telling you what they think about your new business idea, if it solves a problem for them, or if they would be willing to pay for it. Unfortunately, after investing so much time, energy, and emotion into developing the business idea, founders may encounter 1 or 2 people that completely diss it during the customer discovery process and they decide to retreat — avoid those scary people who don’t know what they’re talking about. Right? Who wants to be told that their grand idea stinks or that it needs some work, particularly from someone (a stranger) who doesn’t plan to buy it or be your customer anyways?
…the first reason startups fail — the absence of sufficient customer discovery.
So what happens?
Founders go back to speaking with the weak ties that already provided early affirmations that made them feel good and confident about moving forward with the idea. While spending all of their time with the “support group” and physically building the product or service, there’s little time (or desire) to continue the actual customer discovery process of talking to random strangers who may be prospective customers and getting their input.
Never build a product around what YOU THINK people want. Always get customer input before building anything. Do proper customer discovery.
This leads up to the second reason startups “fail” — they don’t sell their product. Well, let’s restate that — they don’t sell their product to customers quickly enough, in large enough quantities, for high enough prices to keep them in business and growing. This stems back to the fear of selling. Many startups want to rely upon inbound marketing tactics — -like Facebook Ads, Google Adwords, and the like. (By the way, you’ll quickly blow through all of your funds!) The problem with this strategy is it’s a “sit and wait” approach and also that when you’re in the early stages, you don’t have a confirmed, clear client profile that you’re targeting with your marketing. When you are a startup, you have to go get your customers, proactively a.k.a sell. Marketing is great for exposure, but marketing is much different from selling. You still have to sell to close the deal!
…the second reason startups fail — they don’t sell their product.
As a startup, the founding team members are the best salespeople for the business, but unfortunately many try to outsource sales functions too early. (I learned this the hard way too!) No salesperson can come in and save the day for a new startup because the data and infrastructure for the salesperson to be successful isn’t even in place yet. There’s a limit to making lemonade out of lemons and by outsourcing this task to an employee hired to be your salesperson instead of the founders doing it themselves, it sends a signal of insecurity. It signals that there is FEAR — -fear of selling your product or service and facing rejection of someone saying no (there will be lots of them!)Yes, there are several tasks the founders are doing everyday to operate the business and there’s still never enough hours in a day to get it all done. BUT here’s the truth — -nothing is more important than selling your product. Without revenues, the company cannot be sustainable.
So, if you want to dramatically increase the chances of your early stage company (of any kind!) making it, there’s no way around it…you have to talk to people. You have to talk to strangers. You have to be okay with being told “no” 20 times so you can get to the 1 yes.
…nothing is more important than selling your product. Without revenues, the company cannot be sustainable.
I am Monique Mills, a technology entrepreneur and Principal of TPM Focus. As the Principal of TPM Focus, my goal is to help new entrepreneurs build a sustainable business on a strong foundation. I’m known to assertively speak on topics I’m passionate about and this is one of many. This article was originally posted on LinkedIN.