Fact: Most start-ups fail. It's the harsh reality that is overshadowed in a world overflowing with enthusiasm and optimism.
Fact: Most start-ups fail. It’s the harsh reality often overshadowed in an ecosystem overflowing with enthusiasm and optimism.
No matter how hard an entrepreneur works or how much excitement they attempt to generate, few start-ups manage to become viable businesses. Sad, but true.
So why do start-ups fail?
According to CB Insights, the two biggest reasons are “no market need” and “ran out of cash”.
It’s fascinating – and troubling – that “no market need” topped the list because you think it is something that entrepreneurs should know before launching a start-up.
But start-ups are strange and alluring creatures. The idea of a start-up attracts entrepreneurs but the reality is often very different.
Maybe entrepreneurs have blinders on, and their enthusiasm overwhelms anything negative.
Whatever the reason, too many entrepreneurs happily jump on the start-up bandwagon without really thinking things through.
The first and most important step for a new start-up is seeing if there’s a need for the product, or whether that need is already being served. Dan Martell summed it up best with this tweet:
Ask “What problem are you solving?”, not “What product are you building?” – customer first.
The big problem is too many start-up don’t think about the customer. Instead, they focus on the product because, after all, product is apparently king. As a result, the focus is lots of features, rather than creating something that customers need or want.
This product-centric view of the world explains why “no market need” is #1 with a bullet. If you’re not thinking about the customer, you’re pretty much doomed.
It’s not enough for an entrepreneur to create something by being inspired or by meeting a personal need. They also need to validate the idea with potential customers. It sounds like a no-brainer approach but many start-up products happen in a vacuum.
In a recent blog post, Martin Zwilling talked about how entrepreneurs need to give their ideas a “reality check”. One of the seven items on his “reality check” check list was “separating nice-to-have ideas from ones solving painful problems”.
“All your friends may love your idea on how to find the nearest bar or gym, but how many others are willing and able to pay money for your solution? Even good social causes need to bring in revenue to continue their worthy efforts. Ask domain experts to quantify value for you.”
It’s solid advice but start-ups are seductive creatures that quickly get you in trouble. It is difficult to tell an entrepreneur their ideas sucks when they are stoked about its potential.
But with so many start-ups failing because there is “no market need” (aka a bad idea), being honest with entrepreneurs about their idea’s viability is an evil necessity. Hearing the truth may stop an entrepreneur before they go too far, or give them some valuable food for thought.
It could also get entrepreneurs to stop thinking that start-ups are easy. Instead, they will see that start-ups are challenging and involve hard work, and having the right product at the right time.
Final thought: A start-up that doesn’t work out is not necessarily a bad thing because there are valuable lessons from failure. But there’s really no excuse for “no market need” to top the list for why a start-up doesn’t make the grade.
Get your Free Business Plan Template here: http://bit.ly/1aKy7km