With over 600,000 new businesses opening up within the UK every year and many of those failing, we have implemented a brand new scheme just for startup businesses. We hope that by giving them a little help we can prevent some of them closing the doors and shattering someones dream. You can check out our package by reviewing our ISO for startups page.
CB Insights completed research into 101 startups that failed to ascertain the reasoning behind the failure in order to mitigate the events in future. Businesses sighted more than one reason for failure so this is not a proportional split between the categories.
42% of all failures were down to not providing a product or service that the market actually needed. This at first seemed surprising to us but when you think about it closer you have to imagine that a lot of this is down to them not providing anything different to what is already on the market. They may think they have a better product because of one little benefit but it was probably not enough to warrant consumers switching.
29% of businesses failed due to lack of money, this we can believe and are surprised that it isnt greater. Many businesses do not appreciate the value of cash flow and budgeting, especially startups and small businesses. The recent Covid outbreak is testament to that as many businesses (large and small) were closing within days of the lockdown announcement. Too many startups don’t calculate the costs correctly or plan the business.
How many times have we seen people on Shark Tank/Dragons Den pitching their idea and the costs are miles off, the price of the product they are offering is skyrocketing due to their cost calculations and wanting to make a profit. They fail to realise that consumers may not pay that amount of money for a product or service similar to something they can get for a ⅓ of the price. You need to provide something pretty spectacular to warrant the higher price, especially if you are a startup.
We all live in a freemium economy nowadays, many apps are free for example and when someone tries to offer a similar app for a price people are more likely to go for the free app, even if they are subjected to advertising or data capture.
Team failure is next on the list at 23%. Some people get into business with the wrong people, even when there is a small team of founders you still need to have a great team, just because one of you has the money doesn’t mean you should go into business together.
Founders can sometimes all want to be in charge, you need to work out who is responsible for what within the business and stick to that. One of you may need to be ranked higher than the others but that’s just how it is, if you are not comfortable with the thought of owning a business but not having the final say then don’t start. Set the ground rules from the star and stick to them. Too many chiefs and not enough indians sometimes!
This one seems really strange to me, it comes in at 19% and its self explanatory otherwise they would have not been competitors and would have closed before you.
Competition is good and needed, you need worthy rivals in business as it will help you focus on how to be better. Don’t try and beat your competitors, you will be wasting your time. Pick some and balance yourself against them, if they are better at marketing than you do something about it. Don’t try and compete, try and identify your own weaknesses based on their performance.
Best of the Rest
The full table from CB Insights research into why startups fail is shown below, what’s interesting about the statistics is that having ISO 9001 in place can help to address the majority of these issues in one way or another. The standard can benefit startups in many ways but there are some stand out areas that have been detailed below.
101 Startup Failure Reasons
Having ISO 9001 could have possibly helped with a number of the reasons why startups fail, the standard pays a lot of attention to the business needs and helps to focus the management system on those areas of greatest risk.
Risks and Opportunities could have probably helped with all of the reasons if analysed fully but the standouts are:
- Lack of liquidity
- More successful competitors
- Poor marketing
Understanding your interested parties needs could have helped with the following:
- Product or service the Market does not need
- Bad user experience
Understanding your context could help you with:
- Team failure
- More successful competitors
- Pricing and cost problems
- Lack of clear business model
- Bad timing of product or service
Customer Satisfaction could have helped with:
- Product or service the market does not need
- Failure to respond to user messages
- Bad user experience
There are many other clauses within the standard that many of these can fall under.
If you would like to learn more about how ISO 9001 can help your business, especially during the early stages of starting you can read our page dedicated to startups.
We get asked the question “is ISO Certification Worth It?” all the time, when you look at the statistics above then it could be just what you need.