Shopify Ecosystem

Why Do So Many Startups Fail in the First 5 Years?

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Failure is more common for startups than most people think. When the time comes for a new business owner to shut down their business, they join a big number of startups that came across the same – or similar barrier and didn’t pass it. 

Research shows that 70% of startups fail during years 2 through 5. Only a small portion of all those great business ideas succeed in the first 5 years. 

Another research shows that 9 out of 10 startups will fail within the first 10 years. These numbers are concerning, but not strange or unexpected. If you account for the number of businesses being open every year and how fierce the competition is, it is no wonder that the numbers are like this.  

However, this should not discourage you to start your own business. Truth is, if you do things right and thread carefully, yours can be one of the companies that survive – and scale up on the market. 

You’ll find the best tips to do this here – earning from the mistakes of other businesses. In this article, we’ll discuss the reasons why most startups fail these days. 

Not investing in the right tools

As soon as you decide to start a new business, you need to consider many things. Where will it be located? How will you get the funding – and where? Who will work for your business?

These are usually the first concerns of startup owners. The one thing that many don’t stop to consider from the start is what tools they’ll use to make the business work. Most think that time will show them what tools they need, and that they can do it all alone until the business becomes more successful.

While this is true for some of the more advanced tools, businesses still need some basic tools to help them from the very beginning. Let’s take a look at a few tools that you shouldn’t skip at the beginning of this journey.

Quality form builder without coding

You’ll create your product and market it out there, but what happens when you convince people to buy it? This is the goal of every startup and yet, they don’t optimize the buying process long after they open the business. 

You need to make sure that this process is seamless and optimized as soon as possible. Starting with your first sale, you need a good order form that your customers will love. 

That being said, 123FormBuilder is a form builder without coding experience needed. You can use their templates and customize them to improve the experience of your first and future customers. 

This particular form builder can be used to add new services and products when you put them on the market, calculate customer discounts, apply coupon codes, add a logo for better branding, and even integrate payment gateways to collect the business income securely and with ease. 

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Reliable communication tool for your team

A startup equals a new team of members that need to communicate and learn how to work together to fulfill the goals of the company. It’s not like you need to onboard a new employee or replace an old one. Everyone is new to your startup!

Even if your business exists for a year or two, you’ll still need a reliable communication tool to enable your team to work well. Thanks to technology, this is more than possible today. Teams can communicate from any location and at any time, and share documents and other files, all from single team communication platforms like Slack. 

Thankfully, this tool has a free version that allows you to test it out, as well as establish your business and possibly earn some income before you opt for a paid version.

Versatile project management tool

One must-have tool that you need to invest in as soon as possible is a project management tool like Asana. Regardless of your business or team’s size, or the number of projects you have, you’ll need something to collect all that information and organize it for you. 

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Startups often fail because they don’t invest in things that help them manage their everyday tasks. Tools like Asana allow you to create unlimited projects over time, assign tasks, and keep track of the employees in your team. 

These are not the only tools that you could use, but they are a good start!

Flawed startup idea/ business model

Every failed founder will tell you the same – a good business model and plan is vital for success. Before you invest in anything or start selling your products, you need to research and validate the startup idea you had in mind. 

Yes, your idea might seem like the best one you can ever think of – and it might even be one! However, being too eager to start your business and turn that idea into reality can be the reason for it failing soon after!

We are not saying that you shouldn’t follow your dream. The reason why startups fail is not because of bad ideas – it is because of poor choices and lack of research. 

That being said, if you want to avoid joining that 70% of failed businesses, write a good business plan, research the market, and create a business model that is strong and will get you enough investors and customers. 

Scaling up prematurely

It would be amazing if you could build a big business from scratch in just a few years. The option is very tempting, which is why many founders scale up prematurely in these phases. 

They get a few clients and believe their product and services have proven their market-fit. Such excitement makes them invest more and more, forget about the business plan, and jump at every offer that comes their way. 

While scaling up can seem tempting, don’t do it prematurely! Before you decide to rush your business plans and invest more money faster, research the market and make sure that you have enough customers to get to the next stage. 

Poor hiring decisions

There are two mistakes you can make in your startup when it comes to hiring employees. The first one is, of course, hiring the wrong people. The latter is hiring prematurely. 

Chances are, you’ll need a diverse team with different skills to fulfill all of your company’s goals. However, you won’t need all of them right away. Many companies invest a fortune in hiring a team only to realize that they don’t need half of them for a long, long time. 

When you create your business plan, figure out how many people you need to take your business to the next level. Don’t hire prematurely – hire only the people you need. You can always hire new people later. 

More importantly, hire the right people. Make sure that your small team has all the people you need to make your business successful. Find team workers that will be able to join forces with others and meet your company’s goals. Your startup’s success depends mostly on the people that work in it. 

Over-customizing

Customer satisfaction is the core of a quality business. In the attempt to make customers happy, startups often over-customize. Yes, you should make sure that the customer experience is excellent, but this doesn’t mean that you should overdo it.

Not every customer request is reasonable or can be completed. If you over-promise, chances are you’ll under-deliver. This can mean the death of your startup. 

Failure to develop a fitting product

Evidently, what you sell in the company and what type of services you offer will determine the demand and its success. Another reason why new companies fail is that they develop products that aren’t a good fit for the market.

Your product doesn’t have to be bad to fail. You can have an amazing product, but it might not be a good fit for the market right now. This is why you should perform research and test a prototype before investing a fortune into putting it on the market. 

This is the first step toward repeatable and scalable growth. 

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Bad product timing

Another common mistake is the bad timing for your product. Let’s say that you created an amazing product, one that will potentially help people in your target audience. Still, this might not be the right time for you to sell the product. If you release it too early, chances are they won’t come back to you when the timing is right. 

Of course, this goes both ways. If you release your product too late, you’ll have missed a good window of opportunity. Timing is as important as product quality, so research the market before getting anything new out there. 

Ready to get your startup up and running?

Avoiding all these things can be challenging, but if you dedicate enough time to the planning process and invest in the right people and tools, you can certainly succeed in it. Now that you know this, you are ready for your new journey in the business world!

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