The 12 Reasons Why Startups Fail and How to Overcome Them
This is how to become a better Founder driving a vision and team towards success.
While the beginning of my career was focused on large corporate brands — household names — I also had the opportunity to work with some entrepreneurs. When I started my own agency in 2001, I continued to work with a few major brands, but sought out small business (back then startup was reserved for tech companies) stories to tell.
As a journalist, I was hooked. As a PR professional, I knew the niche my company would take. I wanted to tell the unique and compelling stories of these companies first. However, my success in being able to do that depends on the company, and, more importantly, the founder of the company.
After 20 years, hundreds of startups from around the world, even imbedding myself in two, I’ve learned a lot about success and failure in a startup. Some grew and went on to greatness. Some didn’t plan well for expansion and crumbled under the success. Others, well, they all had unique issues, but shared several, listed below, that caused them to fail and shutter.
Entrepreneurship is indeed as rough and trying as everyone says. Grit is truly one of the most important qualities of a good founder and trust and faith trickle through every aspect of the business.
In truth, I’ve been sitting on this article for a while because my agency has been in growth mode since 2018. Reflecting on this list is, for me, a powerful reminder of how I can be a good founder moving forward. I mean, even after 21 years, there are still no guarantees this new model we’re building is going to work.
And that is how every entrepreneur feels even in growth. Most of us use it as fuel but others do not. They allow it to lead them down a variety of paths, or multiple at the same time, that all hit a Dead End.
Don’t want to hit a Dead End with your startup? Let’s hit the list:
1. No vision and no inspiration — If you don’t have sparkles and light around your business how can you expect anyone else to have it? Write down your vision and sit with it. Embrace it. Feel it’s warmth of purpose and let it excite you. Let it drive you daily and inspire those you tell about your business.
2. No plan no direction and the choice not to follow the plan — If you don’t have a road map, even if it’s only a short distance, how do you expect to get from Point A to Point B? You’re a rudderless ship in open waters searching for shore. Get a Business Plan and set up a working task timeline. It doesn’t have to be fancy or take hours to put together, it just needs to be the thing you look at each week to keep you on task towards the direction you want to go.
3. Lack of organization and the inability to prioritize — Okay, so you have your “road map” but you lack the ability to organize your mind, to prioritize your tasks or even stay on task. This. Is. A. Very. Big. Problem. And believe it or not, all too common. When you’re the Founder, you might be flying solo or managing a small team, but you have a lot on your mind. If you don’t sit down and take the time to write down what’s in your mind and organize it, you’re just a spinning wheel. Not going anywhere fast. Yes, you wear a lot of hats, but you can still be effective each day by not allowing yourself to be overwhelmed. My tip for Founders: grab one notebook and separate the pages into categories, then write down all of the ideas that come to you in the corresponding section — get it out of your head and on paper. This way you aren’t up at night thinking you’ll forget “that thing” but it will, trust me, keep you more focused and on task.
4. Mismanagement of people and money — Mismanaging money is certainly a big one on this list as it’s the #1 commodity for your business while launching and growing, but people is one, I feel, gets looked over. Example: one client had attracted some pretty amazing people into the company, working for free, on commission or occasional payments or bonus incentives. I thought it was incredible and amazing. This company was going to take off. The problem was that the Founder failed to make plans or collaborate with these people to make, effectively, job descriptions based on purpose and goals. And, because she was disorganized, she failed to keep track of the team. She failed to lead the messaging and vision and these very bright people were confused or did their own thing. While it is “mismanagement” she failed to be the glue.
5. Poor decision making — What business owner isn’t afraid of making a wrong decision? We all are, but indecision will get you know where and fear will force you to make the wrong decision. If you find yourself in a place of indecision and fear first, you need to get to the root of your insecurity, and second ask trusted allies, advisors and mentors to help guide you through it. While you must deal with your insecurities first, the more good decisions you make, the more confident you will become as a leader.
6. No experience and no desire to obtain it — Sure, the ultimate goal is to hire bright minds who have expert skills and knowledge to create a team, but when you’re starting off, heck, even while you’re growing, you should always be learning for yourself and your business. Example: a smart, somewhat arrogant founder — but someone I genuinely liked as a person — had a great idea that could have really gone somewhere, but he refused to learn the basics of every corner of his business. In turn, he was wooed by a service that took him to the cleaners. Why? He had no idea or understanding of what they did, and they used that to pick his wallet dry. I love when our clients have some understanding of PR. It helps set expectations and creates an open collaboration for success.
7. Hiring experts and not valuing them — So, I mentioned this above and I mention it here, again, for another reason — Trust. It is paramount with the people you bring into the company, and it is required for success. Hiring people, or bringing experts on to your team, and not valuing them; not respecting them is one of the most detrimental things any Founder can do. It creates internal problems and employee frustration resulting in poor work, poor results and overall lack of caring. Why should they care about you and your company — what should be everyone’s company — if you don’t care about them? If you don’t listen to and value them? Seen it. Been there, personally, so I know that this is a one-way ticket to the road going nowhere. When you fail to value your team, you set up for poor decision making and a dictatorship that closes the door on innovation.
8. Lack of delegating — Trust. See above. And Control issues. See below.
9. Know it all vs Fear: Control, or the inability to let go — When you’re an entrepreneur, your company is your baby. It’s your children’s college tuition and your retirement nest egg. It’s personal. And while you have done your due diligence on the industry, been through the long, expensive process of creating a minimal viable product (MVP) you really don’t know it all. That’s why you surround yourself with a strong team of employees, mentors and advisors, but you need to trust them (see #4, #7 and #8). At some point, you need to onboard, train and slowly let go of the people around you, trusting that they will treat your baby with the same love and respect. If you think you can do it all, you’re wrong.
10. Bad attitude, bad temperament — Whoa. I know that being an entrepreneur can be stressful but, like life in general, attitude is 90% of the experience. If you approach customers, prospects, investors, vendors, potential team members with a poor attitude or let your sparkly rainbow vision become darkened by dark clouds, then you can’t complain, too, that business isn’t going well. No one wants to partner with an Eeyore long-term. They want a founder who is excited, generous and leads with the belief of success.
11. Poor communication of your brand story — And this is why I have a job and a fast-growing agency. Storytelling is not everyone’s gift, so if it is not yours find someone who has this gift to help you tell the compelling story of your company through brand, words, images and video. Even for those of you who may have started off down the right path, maybe you took the left instead of right turned and veered off messaging course. When you’re in the weeds of your business, it can be hard to see what direction to go. Hire the right people for the stage of business you’re in and remember that brand design is key and brand communications will, and should, morph over time. You don’t need someone who is going to figure it all out today, but you do need someone who can help you with a brand and brand story that looks forward and makes room for where the company will be in the future.
12. Failure to see problems and address them quickly — In journalism school, while getting my degree in PR, we read and discussed many a case study where companies failed to get out ahead of a problem and communicate right away either addressing the customer directly or the media and nation. There are certain kinds of businesses that definitely need to have additional plans in place to follow for if and when something goes wrong, but the truth is that “something” can go wrong any time, any place and to any business. It can start with a bad online review that explodes into a full online assault. How you handle these situations and when matters. Immediacy is always best, especially in todays on demand review-driven world. See the problem. Fix the problem. Don’t wait. It will be too late. Example: a client had a shipment of product sent from the factory that was horribly faulty. Instead of addressing the issue right away, she waited about a week to “figure out how to approach the situation”. The time spent “deciding” cost her dearly because her lack of immediate response to the faulty product being unacceptable actually resulted in her assumed approval. The product was not returned to the factory, and she was on the hook. Also, important here, read your contracts.
Look you might have a good vision through the window (see photo above) but if you hit any of the targets above, it’s time to step back and get yourself, your team, and your company on the right path.
