Top 15 Reasons Why Startups in India Fail

Tanya Verma

05 Jul, 2019

Nobody wants their startups to fail. Every entrepreneur wishes for their business to succeed and grow. But in reality, 90% of startup in India fail in the very first year. There are various reasons why this happens. In this blog, we are going to focus on these pointers. Also, we will try to create an article that could help people who do not want their startups to fail.

Brief Introduction of Startup in India

In technical terms, the startups can be defined as a business or a company that is in the initial stage of operations. We can also say a startup is a company initiated by entrepreneurs and individual founders to run a drafted business model effectively. Moreover, these corporal business ventures are generally established by one to three individuals who focus on growing their business by developing ideas, products, services or platforms. The Indian Government has set up various steps to promote and register the startup in India. You can also check Government website.

The First Step Towards Shaping Startup in India

Various steps and procedures need to be kept in mind before launching the startup in India. Some of these steps include;

• Knowing the customers’ needs
• Do all the legal formalities in the beginning,
• Identifying all strategies
• Keeping records of Book of accounts
• Be clear of the vision
• Knowing the extent of your budget etc.

One of the steps is also to prepare a business plan. A business plan is a document that is used to depict the thought, vision, goals, description of the startups, etc. in the best manner. It is presented to investors to gain their trust. Things that should be kept in mind while drafting a business plan are;

• Analyzing the business needs, the market trends and the products
• Knowing the demands of customers
• Planning a route map of the business plan
• Planning on things like a website, address and potential customer base
• Making a report, projecting the profit, loss, expenses, etc.
• Creating an emotional connection and explaining how the plan is beneficial for the investor/customer

Suggested Read: Why a Business Plan is considered as the First Step of Business?

Reasons Why Startups Fail

There can be various reasons why startup in India fail. But among these problems, one thing is for sure that there certainly is a solution for them. Let’s look at them one by one:

• Identifying the correct market: Identifying the market is necessary before starting the business. Moreover, this step should be done before beginning to draft the business plan; otherwise, it can lead to a loss of effort and resources. You can avoid it by;
  • Talking to experts and to people who are already in the field. Also,
  • You can research the current business trends of your idea beforehand, which makes it easier and cheaper to make any changes to it in the idea stage.

• Failure of the business model: Business model is known as the skeleton or building block of every business. The business model needs to be of an extent and of a level that can be stable in the long run. A business model is characterized as inefficient when it requires a high cost to acquire a customer. You can avoid it by;
  • Checking if the obtaining of customer strategy is achievable
  •  Achieving CAC within 12 months
  • Estimating sales cycle and return on investment
• Poor team management: Team management is an essential factor when you are running a business. You cannot afford to have any mismanagement of the team, especially when you are starting up your store. You can avoid it by;
  • Specifying roles
  • Specifying hierarchy
  • Making decisions backed by data and not being biased
• Running out of capital: Cash flow can be considered as the factor which keeps the business going and alive. Without money, no business can run. Companies may run out of cash at a point of time, and no business can let that happen. No matter what the idea is or how great it is, you still need to pay your employees, pay dues, rents, etc. You can avoid it by;
  • Keeping track of accounts and maintaining a proper register
  • Work in advance to explore and secure funds before it is late
  • Being in contact with more than one investor
• Poor product experience by customer: The primary purpose of the incorporation of a company is customer satisfaction. If any company fails to do so is bound to fail one day. To avoid this what you can do is;
  • Not hire inexperienced people to create a great product
  • Understand all the technical and other knowledge which are going to be used to create your great product.
• Limited/Poor marketing: Even your great product can fail if you do not pay attention to marketing efforts. It can fail because nobody will be aware of your product in existence. So it is essential to know and carefully use all the marketing strategies where needed. You can avoid it;
  • Promote your product way early before your product is complete to be sold
  • Involve the marketing team in product development and knowing the customer experience
• Losing the focus: Even if it is great to have lots of ideas, try not to get carried away and lose focus. It can happen when you try to expand your business too early or do many things at a time. Losing focus can lead to distraction and waste of time and resources. You can avoid it by;
  • Prioritizing; be clear of your priorities and solve them in the same order
  • Stay focused; don’t sway in the stream of ideas
• Challenges faced in a legal context: Many legal challenges can come when you start a business. When starting a company, you should be aware of all the governing laws. You can avoid these problems by;
  • Consulting a lawyer beforehand who can help save time and money
  • Make sure every employee meet or is in accordance with the rules and standards of the company
• Possessing bad debts: Working with credits can lead to financial obligations. It can convert the current condition of the company to even worse. And in the initial stage, it is even more challenging to avoid credit requests. You can avoid debt by;
  • Look into the reputation of the lending company before issuing the credit
  • Take post-dated cheques
  • Try to make the client pay beforehand
• Facing burnouts: Businessmen can face burnouts from time to time. It can affect their work and personal life. Burnouts can sometimes lead to quitting. You can avoid it by;
  • Maintaining work-life balance
  • Preparing yourself for the long run
• Discordance among the team members: As humans, all the team members have their perspectives and thoughts on a particular topic. Also, they experience different emotions. But these personal feelings and thoughts cannot come in the way of building a startup and eventually can hamper its growth. You can avoid these conflicts by;
  • Making the team members understand that they are equally important. Also that they are a part of something big
  • Taking measures towards resolving these conflicts
  • In case if there is any dispute between the founders steps should be taken to resolve it professionally
• Poor leadership/management: Poor management is one of the factors which result in company meltdown. If the manager or the leader lack leadership skills then there can be mismanagement, and deadlines can be overlooked. To avoid this;
  • Appoint a committed and experienced leader
  • Audit management system appointed in the company

• Failing to raise capital: Raising capital is vital in building a startup. Also, without money, you cannot convert your plan into reality.  You can avoid this by;
  • Not being afraid of rejection and discontinue raising capital
  • Start early
  • Choose the right investor

• Poor selling strategy: When you have finished creating your great product, you need to sell that product to generate revenue. If a company fails to imply a proper selling technique, it is evident that it will fall. To avoid this
  • Educate people about your product
  • Explore methods to increase sales
• Not using enough technologies: Manypeople are not aware of the wide variety of techniques that can actually help and even reduce the workload. Also, where these technologies are used, there is always a need to upgrade. You can avoid this and save yourself from lacking by;
  • Using technologies to develop your business
  • Try to hire a dedicated team for that

Disclaimer

Everyone wants their business to succeed and take all the possible measures to make that happen and convert their vision into reality. If you are thinking of starting up, the solutions as mentioned earlier can help you. There can be many reasons why startups fail. And there is a possibility you will probably face one or two or even more of them from time to time.

Also Read: Startup India Registration Process – The Complete Guide