Why Do Many Start-ups Fail? Here are 6 reasons

The establishment of a start-up company is not always smooth, some succeed and some fail. In Indonesia itself, there have been many start-ups that have succeeded in carrying the status of a unicorn, namely those that have succeeded in Go-Jek, Bukalapak , and Tokopedia . But of course, those who succeeded were not as many as those who failed, aka out of business.

Of course, this failure should be a lesson for start-up companies that are currently running or those that will be running. For this reason, start-up companies need to pay attention to these six things so that start-up companies avoid failure.

1 Planning that no clear

So far, many think that a good idea is enough for business people to build a start-up.

However, that was a big mistake. Without a concrete plan, the company will run without a definite direction.

Building a start-up company is the same as building a conventional company, it is necessary to prepare a mature business plan such as concepts, target markets and solutions to market needs that must be carefully planned.

Remember, the success or failure of a startup company is not only limited to brilliant ideas.

2. Error determining the right market price

Many start-up companies incorrectly identify the market properly such as setting product prices too high or too low, calculating taxes incorrectly and others.

If the company incorrectly determines the price of production, it could be a loss because it turns out that the costs incurred are not proportional to the income earned.

Therefore, you must be good at classifying all costs incurred by the company, especially the price of the product so as not to be wrong in determining the production price.

3. Lack of revenue earned since the premiere launch

Another mistake that is also often made by start-up companies is the habit of burning money by giving free promos, massive discounts and other offers. This money-burning strategy may not be a big problem for start-up companies that get big capital.

If a start-up company wants to run stable and survive, of course from the start it must be able to think about a monetization strategy or a strategy to get income.

You don’t have to burn money, try to offer the best products that have their own advantages in the eyes of consumers. Of course at competitive prices.

4. Do not understand market needs

According to a report from CBInsight quoted from Tirto.id , one of the causes of the failure of start-up companies in Indonesia is their inability to serve or provide what is needed by the market.

Many start-up companies in Indonesia come up with fresh and interesting ideas but actually do not provide significant benefits or are not needed by the market.

For example, maybe a start-up company launches a product that is too modern or out of date so that it cannot be accepted by society. Then people can also not believe in the products or services offered because they are too grandiose.

In other words, the company will be considered as failing to convince potential customers to buy its products. To avoid this mistake from happening, of course, more in-depth market research is needed.

5. Failed to compete

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Another reason for the failure of start-ups is not paying attention and observing what competitors are doing. There are so many start-up companies that have similar business models even though they are packaged in each slightly different concept, call it e-commerce.

This will cause consumers to be confused when choosing a start-up product. One example of a start-up that has failed to compete is FoodPanda, a food delivery service start-up and an e-commerce start-up Rakuten.

To be able to survive and avoid this failure, startup companies again need to offer products that have more value than their competitors.

Giving massive promotions to free products might be a temporary solution, but remember, do you want to continue like that?

6. Lack of funding or money

Money is a thing that has limits and needs to be allocated wisely. The question of how you should spend money is often a riddle, not knowing where the money has been spent and just running out.

According to a CBInsight report, 29% of start-up companies fail due to the unwise use of money.

Start-up companies need to calculate how much funding is needed, how much is for each need, how much is left over, and so on. It is important to know how to maximize existing funds into a high-return achievement.

Thus, make financial plans and monitor financial conditions on a regular basis which is equipped with neat records.

Then, what are the right start-up steps to become a successful start-up? They have products that meet their needs, do not neglect any aspect, grow quickly and successfully overcome the competition are important points to become a successful start-up.

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