6 Reasons Why Many Startups Fail and How to Avoid Them


Quitting your job and starting up your own business can be one of the most difficult and challenging things anyone can ever do. It’s such an uphill climb that 90% of startups fail within their initial three years. However, if you manage to work hard and play your cards right, while avoiding the common pitfalls that early startups usually fall victim to, you can easily grow your company and thus reap the benefits of having your very own business to earn money for you.

To help you in that regard, here are the most common reasons why many startups fail, and how to avoid them.

Mismanaging the company budget.

Any startup, no matter how much capital they’re starting with or how much money investors have pumped into them, need to be on the ball when it comes to managing its budget. The monthly overhead and other in-house expenses should never outpace the budget. Otherwise, the company will have to either dig into its revenue or take out loans, both of which are never good while the startup is still trying to find stability in its earlier days.

To prevent against this, simply do some common-sense cost-cutting whenever reasonable. One of these areas that you can safely do so without compromising your company is in office supplies. For example instead of buying new printer ink cartridges, go with the more money-efficient route by choosing remanufactured printer ink cartridges instead. Remanufactured printer ink cartridges are basically the same as new ones—they’re just old, spent cartridges that have been cleaned, reassembled, and then refilled with the same kind of ink. Anything that’s broken in them are either repaired or replaced outright. They offer the same quality for the fraction of the price.

It’s not just printer cartridges that have these. Other office supplies have the same kind of cheaper alternatives. Look around and canvass for them. With enough legwork, you can find reliable and trustworthy vendors who will end up saving your startup quite a bundle in the long term.

Another cost-cutting measure is to recycle or repair old or damaged equipment, instead of buying new ones. Let’s say you’re a professional wedding photography service that’s just established itself, and you already have a surplus of old equipment just rotting in storage, such as drones. By fixing drones that are damaged, you can still get some years of dependable use out of them. This delays the expense you’ll have to suffer when you inevitably have to replace or upgrade your equipment.

Catering for a non-existent or insignificant market.

In an ideal world, every startup either has a healthy and thriving market to cater to or has a specific problem to solve that everyone will pay money for. Unfortunately, we live in a reality where it’s very possible that the market you created your startup to serve may be a very small or even nonexistent one. The problem that you may have gallantly set out to solve with your startup may even be so insignificant that people are either willing to ignore it or sort it out themselves, rather than paying you to do it. It’s a lamentable fate that happens to many startups even today.

Avoiding this can be difficult, as often there is no clue on whether or not a problem may end up becoming so serious that the market for solving it suddenly booms. Any delay in setting up a startup that can solve this problem can result in being left behind by your competitors when it comes to nabbing customers.

Prevent against this by researching into your chosen industry as much as possible. Don’t just rely on online searches and cursory interviews and do the legwork yourself. Go out there and interview potential customers, have your soon-to-be employees talk to the right people, and see if there’s truly a need for your service or product. By doing this, you can make the necessary changes and adjustments without too much cost.

Having a poor management team.

Having good management can easily spell the difference between success or doom in a company, much more if it’s a startup. Without proper management, the startup will be doing everything wrong: like making weak strategic decisions and having gross miscommunication issues between teams, having zero company direction, and generating little to no revenue-earning output.

Avoid this by making your staff answerable and accountable to each other. Just because someone is in a management position or role doesn’t make them unaccountable to the production staff and vice versa. Major decisions must be made with reliable and up-to-date information, never with gut feelings or guesswork. Finally, frequent and reliable communication should always be on the table. It’s better for everyone to complain about having to constantly talk to each other rather than problems being caused by too little communication.

Customers having an awful experience with the product or service.

As a startup, it’s on you to offer a product or service that absolutely bowls over your customers the very first time they try it out. While it doesn’t have to be completely life-changing—it’s very rare for a product to have something of that quality, unless it’s something hobby or entertainment-related—it does need to be at a very high quality right out of the gate. This means no missteps, quality control errors, or anything that the customer can complain about. If your product and service is introduced to potential customers with these flaws, then you can easily expect your startup to go under in no time flat.

Stop this from happening by investing heavily in your product or service. No cost-cutting when it comes to its delivery or creation. Absolutely zero corners cut. Give your customer the finest version you can, even if it means doing so at a loss. The profits from pleased and loyal customers will pay for it in the long term.

Losing focus of the startup’s key goals.

A startup is often built upon a groundbreaking idea, something that hasn’t done before in its chosen industry. While this can easily translate into financial success due to a temporary lack of competition, it can also mean that the founder can get carried away with new ideas that could sway the startup in a direction that detracts from its revenue-earning focus. This can manifest in a handful of ways, such as a startup trying to expand its offerings much too soon, or to be obsessed with providing new features without refining what it currently has. It can also lead to micromanagement, something that employees absolutely despise.

Avoid this by keeping the focus on the main problem that you formed your startup on, and keep refining your product or service until your customers are completely satisfied with it. Only then should you allow yourself to move on with new ideas or features. Having a list of things not to do, alongside your “to-do” list, can also help in this regard.

Failure to pivot.

Startup founders can find it hard to pivot their ideas into something more than what they first come up with. While dedication is certainly something to be admired, and there’s merit to sticking to your guns, you also have to change direction sometimes—especially when it looks like everyone’s heading towards that new direction. It doesn’t necessarily have to be a complete change of thinking, but rather adding to your first idea rather than abandoning it. Google, for example, progressed beyond a simple search engine—it’s now a digital assistant at your beck and call.

Prevent against being broken by the coming tides of progress by seeing pivoting as evolution, and not a threat or a distraction from your original focus. Keep your customer in mind at all times: are you serving them better or worse by sticking to your guns? If it’s the former, then great, stay there. But if it’s the latter, then it’s definitely time to change. Your customers may abandon you if you allow yourself to be left behind.


Don’t let all the blood, sweat, and tears involved in the creation of your startup go to waste. Learn these pitfalls and avoid them so you can continue carving out your very own niche in the business world, and enjoy the benefits of being a thought and business leader in your chosen industry.