Number One Reason Why Startups Fail

Number One Reason Why Startups Fail

Are you a would-be entrepreneur with a great new business idea?  Do you feel you can become the next Microsoft?  To be a successful business owner, the first question you need to answer is: “Do I have a market for my new business idea?”

 I’ve been an entrepreneur for a very long time.  With four successful startups, I learned early on that to start a business the first thing I needed was customers.  Creating customers for a brand new product or service no one else sells is an uphill battle.  It takes a great deal of money to market something no one else sells.

 Early in my entrepreneurial career the first business I launched was a mail order company, not unlike online marketing today, that sold lingerie fabrics.  I paid a great deal of money to advertise my products in magazines and purchase inventory ready to fulfil orders.  When the orders did not come, I knew it was a mistake to think someone was ready to buy what I was selling.  Customers did not feel it was convenient to purchase by mail when local stores sold the same items. The market was not ready for convenient door-to-door shipping.

 I became one of the 42% of yearly entrepreneurs that failed due to no market.  This statistic has not changed much over the past several years.  Overall, 85% of all startups fail for various reasons.  The largest reason being no market.  No market means no customers and no customers means no money deposited into the business owners bank account.  Without money, there is no business.  I closed my doors very early.

 I successful created four more startups since my first failure.  The first step I take when starting any new business is evaluating the competition.  If no one else is selling my product or service or not selling it in the same method I plan to use, then I ask myself,  “Can I sustain the losses it will take to create this new market?” 

 When Amazon began in July of 1995 selling online books and went public in 1997.  Investors believed the market would come and continued to invest in a company that took more than 14 years to produce as much profit as it produced in the latest quarter alone.

 Unless I know I have a business idea that investors will fund for years waiting for the market to come, today I won’t start a business unless I have competition.   I focus on taking existing businesses and serving their customer market better.   Wendy’s created a business that sells a better hamburger over McDonalds.   The founder of Wendy’s found a niche left open by McDonalds and other fast food hamburger sellers.

 I advise my followers to take this first step when considering a new business: 

• Identify the current competitors
• What differentiators do these competitors offer to capture a portion of the market

 Once I have this step completed, I research what niche is available these competitors do not fill. After I identify the niche, I test the market and create a marketing plan focused on advertising this niche.  If the results of my market research indicate I will have a base of customers, then I move on to the next step of evaluating how long it will take my startup to reach a million-dollars in annual sales.  

 If there is no identifiable marketable niche, I move on to a different business idea.  There are a million of them to choose from.

Written by Darlene Ziebell

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