The 6 Steps Guaranteeing Startup Failure

Linkilaw Startup Advice & Tips

It is common knowledge that start-ups often fail; in fact close to 90% will fail in their first two years. Understanding the root causes of these failures can inevitably help your startup avoid the same mistakes and the steep path to failure.


“If you want to effectively kill your startup right out the gate, it’s important you do absolutely no market research to determine if there’s even demand your product or service. People are sheep. They follow the herd. They don’t know what they need, it’s your job as a visionary to tell them.”

– Zack Andresen, Founder of


Here are six steps that can lead to your start-up being in the 90% failed category and how to stay away from them.


  1. Lack of research


Just like if you show up to an interview without knowing anything about the company, not knowing the market you are entering with your startup business is likely to result in failure. It might seem a bit obvious, but a lot of start-ups fail in the area of marketing research. Knowing the market you are entering, your product’s strengths and weaknesses, your consumers’ likes and dislikes, as well as your competitors’ strong and weak points, is inevitably important for the success of your business. Part of the process of turning potential consumers into revenue includes defining your startup’s unique selling point and what differentiates you from the competition. You won’t be able to know how to properly market or sell yourself without a thorough marketing research plan.


  1. Launching without a specific customer in mind


One of the important tasks as an entrepreneur is to find out and identify before you scale your product into the broader marketplace, who exactly your target customer is and how do you plan to make that customer use your product. It is a common mistake to get out there in the marketplace without having a specific customer in mind. The reason why that could be deadly for your start-up is because once you’ve figured out who you want to target, you can carry out extensive research in order to understand their exact likes and dislikes, what would appeal to these consumers, and how to get them on board with your product/service. If you don’t have these things in mind through every stage of your business plan, however, it is very easy to get things wrong.


  1. Poor hiring and leadership practice


Having the right team to push your start-up from an idea into a reality is incredibly important and could be quite challenging to achieve. Picking out and hiring a diverse workforce with a balanced skill set is of great value for start-ups. Motivated people who believe in your idea and are willing to put their time and effort into helping you achieve all the things you’ve planned for the business is something of great significance for your success. Hiring the wrong people, on the other hand, can hurt your business in ways that might be difficult to recover from. Joe Kraus, a current partner in Google ventures, even states that “The cost of hiring someone bad is so much greater than missing out on someone good.”

However, the right team with the wrong management style will be just as susceptible to failure. It is very important, especially to start-ups that have attracted a good quality workforce to pay attention to their ideas and suggestions instead of having a rigid hierarchical structure. Being able to motivate your employees and show them appreciation when needed is of great help when starting a business.


  1. Financial mismanagement


In order to run a successful business, it is required that you either have a great financial knowledge or hire someone with a great financial background. Even though in the beginning stages of your start-up that may look unnecessary because you are not operating with large sums of money, budgeting, cost control and negotiation skills are of great importance and value for your future success. If you believe you lack the financial and negotiation skills to manage your business, hiring someone who does might seem like a costly option, but it could be a great pay-off investment as it’s easy to overspend and quickly go down the “death spiral” known as poor cash flow.


  1. Lack of networking


Probably one of the essential things for any business and especially crucial for start-ups is networking. Having a good network of possible employees, customers, advisors and people with connections would be of great help through every stage of your startup development. The time to start is before you ever think about your business ideas. Networking should always be a vital part of your career.


  1. Lack of legal knowledge


One of the most commonly ignored areas in start-ups is legal protections. However, this area is one of the most integral ones for the future success of companies. Hiring people with knowledge of the law or consulting yourself with a lawyer before setting up a business could be extremely beneficial because of a number of reasons. In the beginning stages of setting up a business, knowing the legal risks around the most common sources of startup failure, like co-founder conflicts, could help set up existing plans and draft documentation needed to avoid disputes. In addition to this, being aware of your rights and duties as a service/product provider can help you make important decisions and avoid potential disputes with consumers. It often costs more to fix or undo legal mistakes later, both in terms of time and expenses, than to prevent it from the beginning.

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If you think you would benefit from legal help when it comes to setting up your own business, or in any other legal area you would like to know more about, you can get in touch with Linkliaw today.