My startup failed now what? This is the question that comes to the mind of every entrepreneur after his/her startup fails. According to the National Venture Capital Association, between 25% and 30% of venture-backed companies end in failure. Many entrepreneurs have experienced early failures before finding success, so it’s important to realize that there is no straight route to the top. Understanding the client is a critical success element for startups and any other company that wants to thrive financially. If you don’t know your target market, it will be impossible to create a product or service that will really satisfy your clients’ needs. In this guide, you will know what to do after startup failure and how to get back on your feet again. First, let’s talk about the most common reason why startups fail and what may be done to avoid that situation.
Reasons That May Cause Your Startup Failure
1. Market FluctuationsNo one knows what the market will look like a year from now, two years, or even three years from now. In fact, it may not be clear for a long time. You may think you’re onto something great, but you could be the first to see a wave of change come crashing down around you. When you think you’re the first to come up with a new product or service, you’re underestimating the risks. The best way to avoid this is to be an expert in the market you’re entering. Find out what’s going on there and how it relates to what you’re doing.
2. Leadership ChallengesStartup founders face a wide variety of setbacks, including poor recruitment, bungled product launches, and unstable businesses. While there are a number of companies that have been successful with a single founder, most startups are founded by multiple partners. But if you’ve got two founders, you’ve got a much higher probability of startup success than if you’re only working with one person. The reason is that if one person is the founder, that person is solely responsible for making sure the company succeeds. If he or she is not a strong leader, the company could fail even if the ideas are great and the team is fantastic. On the other hand, if two people are co-founders, one of them can be a strong leader while the other acts as the project manager, and they both share responsibility for ensuring the company succeeds. Even if you have a strong team, you still need to have a solid partnership between you and your co-founder.
3. Black Swan EventA black swan event is one that is very unusual and can cause a significant change in the market. For entrepreneurs, black swan events often cost them their business, because they don’t have a plan to deal with the event that causes them to fail. Black swan events can be a combination of factors, such as a product that doesn’t live up to expectations, a poor product or service proposition, and/or a poorly executed marketing plan. One of the most common black swan events is an unexpected economic crisis. Take the 2008 financial crisis, for example, when many startups were abandoned because they were unable to generate enough revenue to support their operations. The reason that many startups fail is that they lack the experience and business knowledge to deal with a black swan event.
4. Incompetent TeamHiring the right people is a critical part of any small business, and in many cases, it’s the single biggest factor in whether or not a business succeeds. But startups generally have a good idea of what they want, and if they can’t find what they need in the market, they may not be able to find qualified candidates who will make a difference in their business. If you’re a startup that’s having trouble finding the right people, you need to take a closer look at your recruiting practices. As with many other aspects of a startup, you need to make sure you’re doing things as efficiently as possible, and that you’re mindful of the quality, not quantity, of employees.
5. Poor business strategyA startup can have a great idea, but a flawed business plan may mean that it won’t be able to raise capital needed to launch its business. This is one of the more common reasons startups fail, but it’s also one of the most important. A good business plan should lay out the entire venture from quarter one to the end of the calendar year and outline steps for each stage of the venture. It should also outline the metrics the team will track and use to help them make decisions along the way. It should also describe how the startup will make money, whether through advertising, subscriptions, or some other approach. A good business model and marketing strategy can also help a startup get into the right mindset. Many startups are so focused on their idea that they don’t think about how they’ll connect with the customer or how they’ll actually make money.
6. The inability to adapt to changing circumstancesMost companies fail due to a failure to learn from mistakes and make necessary improvements. Sometimes startups just don’t have the resources to do things differently, but in many cases, there’s a disconnect between what the startup is doing and what the market wants. Startups are often doing things that are new or aren’t working, but they don’t know it. Entrepreneurs believe they are doing it correctly while in fact, they are not. For example, some startups think that sending a generic email to a list of potential customers is a guaranteed way to convert leads into customers. They just get a little email out to their list, and then wait for the phone calls to come in. This is a common mistake. It may work for some companies, but it’s not a good way to make money in today’s market.
Now What to Do If Your Startup FailsThere can be several steps failed entrepreneurs need to take after their startup failure. Here we mention the important steps that can help you to get out of the difficult situation. 1. Engage with other businessmen Increase your exposure to entrepreneurs by attending more networking events, engaging with more businesses on social media, or just introducing yourself to company owners. Engage them in conversation by telling them about yourself and asking them about their own lives; you’ll both learn from each other and create some new friends. Hopefully, you’ll be able to get some understanding and advice from other company owners on how to handle the challenges you’ve encountered. 2. Analyze past failures Take a look at your company’s failures and identify what went wrong. You can find these failures in a variety of places. You might ask yourself, “Why didn’t I launch sooner?” “Why didn’t I raise more money?” “Why didn’t I get my team together sooner?” “Why did I fail to build a community?” “What else could I have done differently?” “Why didn’t I do X?” Write down these questions and answer them in the context of the failure you’re examining. 3. Consider developing a comprehensive business strategy If you have what it takes to be a businessman, no company failure should deter you from pursuing your goals. Get into the habit of documenting your early business ideas, and start outlining the most promising ones with rudimentary strategic planning. 4. Avoid Legal Challenges If you are unable to bear the loss or don’t want to run your failed startup, then you can think about dissolving your startup. The legality of an entire company is ended via a legal process known as dissolution. State law recognizes a company as a legal entity if it is not formally dissolved. This implies that the company must continue to file yearly reports and pay franchise taxes.
Here’s How GoodBye Startup Can Make It Easier For You to Dissolve a Failed Business, and Avoid Legal IssuesIt takes a lot of time, effort, and paperwork to dissolve a failed corporation. Feel free to get in touch with GoodBye Startup if you don’t know anybody who can assist you at this phase. GoodBye Startup is a team of professionals committed to assisting company owners in the termination of failed companies in order to avoid legal and financial issues. Goodbye Startup can assist you in developing a personalized dissolution plan that will guide you through the whole process of dissolving your failed startup. Click here to Schedule a Free Consultation Call With GoodBye Startup.
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