7 Reasons Why 90% of Startups Fail and How to be the 10%

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A former Navy SEAL  sees the correlation between the worlds of entrepreneurship and special operations. They both have similar attrition rates. Managing fear is critical. And both can have very fulfilling upsides.

Knowing the odds stacked against you is important but that should be a driving force behind the motivation to succeed. To defy the odds and crush the statistics.

The fabled stories about the biggest brands that had explosive growth are inspiring but few and far between. And the “overnight” success stories usually have a long ramping-up period before you ever hear about them.

There are of course some basic fundamental reasons most start-ups fail. As an entrepreneur, I have had my fair share of failures and successes. The key is to learn from the mistakes, study those that are getting it right and keep pushing forward relentlessly.

Here are seven reasons start-ups fail. By avoiding these pitfalls your chances of success increase exponentially.

They offer something few customers want or need.

A survey of failed start-ups published in Fortune showed that 42% offered a product or service with little to no market need. Not every start-up is going to find that white space nobody has thought of filling or launch a revolutionary idea that takes the world by storm. In fact, most won’t. Most successful start-ups find a way to reinvent something that’s already out there.

The ones that fail probably don’t take the time to do proper research, study the marketplace and analyze potential competition. They get caught up in the excitement to properly prepare. They don’t want to find out that nobody wants what they have to offer. Which in turn means they have to later find out the hard way.

In order to be the 10%, make sure there is a marketplace for your offering.

They are satisfied with marginal growth.

Growth has to be calculated and driven by intelligent strategy. But if a company isn’t experiencing significant growth after months of being in operations there may be a problem. Like the saying goes, “If you aren’t growing, you are shrinking.”

Not every entrepreneur wants or needs rapid growth, which does come with a distinct set of obstacles. The problem is that when aggressive growth isn’t part of the plan, someone else will bypass you quickly and potentially render your business obsolete. Or at least less relevant.

In order to be the 10%, you must embrace growth. Know that the business needs it to survive, shareholders expect it and employees are energized by it.

The entrepreneur doesn’t transform into a leader.

Like a caterpillar transforming into a butterfly, the entrepreneur must quickly learn how to be a leader. Being a person with a good idea is vastly different than knowing how to lead a brand to greatness. How to have courage and inspire others to take risks. This is a big point of failure for many companies.

Smart entrepreneurs either learn how to become a great leader or they step aside, do what they do best and outsource the rest. Leadership skills are not innate talents. They have to be worked on and developed over time to achieve higher levels of personal and professional performance. To learn more about business leadership, download my new free Ebooks.

In order to be the 10%, learn how to lead a team into battle. Study leadership. Practice it. Get a mentor. And get feedback from the team regularly.

Situational awareness is non-existent.

In combat, situational awareness is imperative for accomplishing the mission. Entrepreneurs and business leaders must also be aware of their surroundings in order to mitigate surprises, competitive roadblocks and the external forces pressing against them.

Start-ups that ultimately fail have founders and leaders that get too caught up in the minutia. They spend too much time working in the business and not enough time focusing on strategic growth, studying the competitive landscape and ensuring their product or service is getting in front of the right audience.

In order to be the 10%, be aware of everything going on inside and outside of your business. Know your enemy. Know the terrain. And have a plan for navigating inevitable obstacles.

They don’t properly manage their cash flow.

This is a big one. Without cash on hand, any business is at significant risk and won’t have the financial resources to withstand the slower periods. Any entrepreneur or business leader has a fiscal responsibility to properly manage cash flow. Shareholders, partners, employees and customers are all banking on the hopes that the business will not fall into a cash poor position.

Not all entrepreneurs have an affinity for finance. And that’s fine. They just need to find a great CFO or VP of Finance that can not only manage the business’s cash flow but also properly budget for growth. This requires setting aside funds for research and development, training and all of the other activities that cost money but have an exponential ROI.

In order to be the 10%, don’t lose sight of the finances. Know the numbers backwards and forwards. Understand where you have to invest for growth and where to keep costs lean.

They fail at defining the mission, values and culture.

Many entrepreneurs fly right past this step and focus solely on sales and revenue growth. As mentioned above, growth is critical, but any successful brand has a concise mission, a clear purpose, core values and well-defined culture. And the founders and leaders know how to weave all of this into everything the business does.

I know how important this is because I have failed to define these things early on in my own businesses. They should be the lifeblood of the business and its reason for existence. Otherwise, what are you really giving your employees and customers to support and believe in? Nothing.

In order to be the 10%, define the mission, values, purpose and culture early on. Then align every strategy, decision and communication around them. Do this, and no one with ever question the “why.”

They lack the ability to quickly adapt.

Entrepreneurs are constantly faced with problems that they don’t have an immediate answer to. That is simply because they haven’t yet been faced with certain barriers. Successful entrepreneurs have the ability to adapt easily and lead a team that can do the same. Change isn’t painful, but the resistance to change is. They lean on the team to help solve problems and move forward.

Change in any business is inevitable. Developing an adaptive leadership style is the path to greatness. Those that fear change and fail to make the necessary adjustments to their approach, business model or product won’t last long.

In order to be the 10%, know that change is coming. Embrace it. Evangelize its purpose and get the team’s buy-in.

There are many other challenges that start-ups face which include but aren’t limited to difficult partnerships, misalignment on priorities, advancements in technology and building the wrong team. By understanding these seven pitfalls and developing a plan to avoid them, your chances of success go through the roof.

Now get after it!