WHY FIRST BUSINESS FAILS?

10 September 2013 by Anjali No comments

We have been working with startups since 2009. As it would be, we have witnessed many success stories and business failures, some of those we worked with, some we didn’t work with, and the others who came to us with rescue missions. We found that most of these business failures were led by first time entrepreneurs. Our observation also helped in identifying 10 common reasons why these “first” businesses failed.

Here are 10 common reasons we witnessed of why and how those first businesses failed?

1. Saying “NO” to Delegating Work

Nurturing a company involves a number of separate tasks. Operational excellence in product/service delivery is a must. You can’t go without a good web application either these days. Then there are legal and accounts related matters that need timely devotion. And finally comes, the sales and marketing endeavors that actually brings business to your company. You can’t ignore one for another. But then, you can’t be good at all of them either.

However, many first-time-entrepreneurs tried to do-it-themselves due to either lack of finance or surplus of fear of burning hands. They simply discarded delegating, outsourcing and offshoring options. However, they lacked experience and expertise. They tried hard, made mistakes and became frustrated. Later, they got too burdened and lost interest in what they thought was their dream recantation.

2. Building a “Yes Boss” Team

Building an excellent team is equivalent to nurturing a successful startup. Startups try to hire talented people who work hard. Give them a task and they will do it without asking a question. This creates a “Yes Boss” team in your company. A “Yes Boss” team blocks your imagination and doesn’t stop you from stepping towards failures.

This became dangerous for a first-time-entrepreneur who required someone to show mistakes, contradict, argue, suggest alternatives and brainstorm towards achievement.

3. Feeding Hierarchical Demon

First-time-entrepreneurs desire to enjoy the supremacy of being at top of a company’s decision-making. But being at the top comes with a price of being alone at the top. No one will love your dreams as you do. No one will stand with you to share your tough times in business. No one would buck you up when you are down.

One such hierarchy created distance, communication gap and above all a sense of being just an employee who jumped off the ship as soon as there was a storm. The founder had no one to stand with at the end.

4. Hiring, Not Retaining

Iteration is inevitable.

But a startup took it as a boon to cut cost. They hired new guys at less pay. They didn’t think about employee growth. Nor did they try to retain good employees if that meant paying higher. Thus, a gap got created. The newcomers were completely not in-line with the company’s culture & goals and took time to get trained before they start producing quality result. Later, iteration happened so rapidly that there was no one who knew past projects. No Knowledge Transfer happened and further work got stuck.

5. Skipping MVP

Being new to entrepreneurship is likely to fill you with competitive spirit; such that you offer better proposition than your competition.

A startup that we worked with spent a lot of time and money in building a full-fledged web application. They built a Maximum Viable Product instead of testing a Minimum Viable Product in the market first. By the time they launched, customer requirements changed. They were left with no fund for further development or marketing. It led to the failure of the whole project where time, money and resource had been exhausted for no positive outcome.

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Anjali

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