Ernie: Of anyone at RC.org who should have been able to launch a successful startup it is you. Not that with a 90% startup failure rate globally for all startups, anywhere, the odds were in your favor. At best your chances were in the "longshot" category. Still, with years in marketing at Apple your odds should have been halfway decent. Why, then, did the business go kerplooey? Curious about your own post mortem analysis. Billy ========================== (http://www.forbes.com/sites/quora/) Forbes
_Tech_ (http://www.forbes.com/technology) 3/06/2015 @ 12:08PM 18,884 views The Top 5 Reasons Startups Fail _This question_ (http://www.quora.com/What-are-the-top-reasons-why-startups-fail/) originally appeared on _Quora_ (http://www.quora.com/) : _What are the top reasons why startups fail?_ (http://www.quora.com/What-are-the-top-reasons-why-startups-fail/) _Answer_ (http://www.quora.com/What-are-the-top-reasons-why-startups-fail/answer/Chris-Baskerville-1) by _Chris Baskerville_ (http://www.quora.com/Chris-Baskerville-1) , 11+ years Corporate Reconstruction, Business Builder, Grew up in Small Business, on _Quora_ (http://www.quora.com/) Having handled 700+ corporate and personal insolvencies, I would make the following observations as the top 5 reasons why startups fail: (1) Lack of capital: “Cash is King” Most business owners that I have dealt with start a business not pre-planning the funding requirements necessary to: 1. Obtain key infrastructure (such as: plant and equipment) by inception; and 2. Have sufficient cash flow to fund the day-to-day operations. I have used the ‘aeroplane analogy’ many times to demonstrate this point. Imagine saying to a fighter pilot: “We have a new fighter jet for you to test, it is only missing two (2) ailerons, apart from that, it is good to go. ” The lack of foresight to see and obtain the capital requirements of the business, goes hand in hand with the fact that the most unsuccessful business owners simply have no business plan at all (this is elaborated further below as it is considered one of the key reasons for startup failure). Having only 95% of the necessary capital to start your business is not enough. You need 100%. Just as an aeroplane needs 100% of its infrastructure to fly. Small home-based businesses obviously need less capital than a restaurant or airfreight transport company. (2) Expanding too soon: It is very easy for a business owner to think that because of a few ‘early day successes’ that they have nailed their product mix sufficient to expand to a new office, factory, warehouse, geographical location, or some other superfluous area. Expansion needs to be fully costed and properly funded. Imagine saying to a Chief Financial Officer: “Hey, our new software, that will revolutionize social media, requires 100 users to reach the Break-Even Point. We currently have 20. I think we need to move to an upmarket city location so we look good to our customers”. Not that accounting is a blood sport, but I would think you would be shot on the spot. Expansion also requires infrastructure, not only from a plant and equipment perspective, but also from a personnel perspective too. Do you have the right team to manage the expansion? Is your team trained to handle the rapid growth as you achieve scale? Some of the most tragic expansions I have seen are where a business that has yet to get their business model right in the location they originally founded, all of a sudden expands their business into another geographic location that stretches logistic capabilities and dramatically increases overhead expenditure. What is your response time if things go bad? How soon can you or your business react to the good and/or the bad? Can your business afford to pay for multiple locations? (3) Heavy reliance on debt funding: “A man in debt is so far a slave”. [Ralph Waldo Emerson] As soon as a loan is drawn down to start a business (a loan which is most likely secured against the family home), you are on the ‘debt clock‘. Debt payments are now cemented in time and you need your business to get to the Break-Even Point (BEP) as fast as possible. Not achieving your BEP or, not achieving your ‘critical mass’ (some people prefer to use the term ‘ scale’) in time, may mean further borrowings to keep your startup afloat. The most obvious places to obtain further funding, are from personal credit cards followed secondly by refinancing the mortgage on the family home. Then there are the family members, your best friend in the whole world (at least when they are getting their money back), and so on and so forth, until you have no further capacity to borrow and interest repayments kill your precious cash-flow. Too many times, a failed business leads to the loss of the family home and potentially, the loss of the family (i.e., separation/divorce). (4) Poor strategic management: “A fish rots at the head” I have seen time and time again, a person who was great at their trade craft (say, plumbers, builders, accountants, chefs etc.) make a move to their own business. While they are great (if not fantastic) at their particular trade, they are not groomed nor educated for business. Business is its own wild animal. One wrong move and it can eat you alive. I have often wondered why the governments of the day do not instil a ‘ business owner test’ to those wishing to start their own business. Pass the test and you can be in business. Then again, I think about all the money us Insolvency Practitioners (and our lawyer friends) make from failed businesses … that thought quickly goes away. “Knowing how to operate within a business is mutually exclusive to know how to operate a business”. (5) No business plan. “If you fail to plan, you plan to fail”. [Benjamin Franklin] Also: “Hope is not a strategy”. [Rudy Giuliani] Imagine saying to a NASA flight instructor: “Hey, let’s chuck a couple of guys in a scuba suit, put them in a fast plane, and see if we can touch the moon?” A mission to the moon requires a properly thought out plan. So too does your business. Think about the family holiday. There are a few key stages that the holiday goes through before coming to fruition: 1. First stage – Concept: “Lets go on holidays to Disney World.” 2. Second stage – Basic planning: “I think October is the best month based on lower crowd numbers, lets fly to Orlando and rent a car.” 3. Third stage – Detail: “We fly American Airlines from gate 52, on 29 January 2015 at 8:35am, staying 9 nights at the Caribbean Resort. A Honda Civic is available on arrival in bay 28.” Most failed business owners stop planning at the Concept Stage. Yet, when it comes to our holidays, meticulous details are planned for. Why not use the same mantra for your business? I mean, at the rate at which small to medium business fail, its only going to make you or break you. The other key element to the business plan is to get you explicitly stating your ‘Why‘. * Why are you in business? * What need are you satisfying? * Why has it not been done before? * Why can you deliver a better result than your competition? * How will you obtain your ‘first mover advantage’? Planning your business forces you to seriously think about all areas of your business and not just the fluffy parts of your business like “sales” or “ profit“. Meticulous details like: operations, employee ramp-up, funding, and forecast financials and logistics are needed to be considered. But you only need to do this if you want to give yourself a fighting chance. If not, leave your business concept on the napkin you used at the local bar. =========================== marketwatch.com 20 biggest reasons why startup companies fail By _Jurica Dujmovic_ () Published: June 16, 2015 ... [one] common reason for failure... is that startups “are doing good things but doing them out of order. In other words, they are doing things that seem to make sense, like investing to build the product, hiring good people to help them sell it, developing marketing materials, and essentially doing all the kinds of things that big companies with lots of resources do when they are executing on a known opportunity.” The issue here, however, is that these investments make sense only when there is extensive pre-existing market research supporting them, or years of sales data that justify the risk. In the majority of documented cases, instead of assessing the risks and opportunities objectively and scaling those investments accordingly, startups rely on guesswork, giving more credit to their vision of what the future may hold, rather than examining real facts. This is understandable, as many startups bring new and never-before-seen products to the market, but this is also why they need to manage the process of coming to the market differently. Various factors including: Wrong team for the project, poor networking, inadequate business model or plan. Number 1 reason for failure: No market for product, no demand, or lack of effort to generate demand. ------------------------------- January 31, 2014 entrepreneur.com 9 Reasons Why Most Startups Fail After an into here is a short list that maybe includes reasons that apply to your startup: I’ve always been a big fan of learning from _failure_ (http://www.entrepreneur.com/topic/failure) , so while most of my high-tech brethren like to talk up their successes, I try to help startups avoid catastrophic failure and get to the next stage. I say “try” because, while some make it, most don’ t. That’s the nature of the beast. In any case, I have a pretty unique perspective on what tends to trip up founders. Here are nine ways I’ve seen startups fail time and again. Their entrepreneurs live in a vacuum. It’s easy for entrepreneurs to become so focused, so wrapped up in their own vision, that they lose perspective. That’s actually one of the key benefits to seeking venture capital from firms that know your target market: they give you feedback and validate your strategy. Their idea doesn’t uniquely solve a big problem. Contrary to the old line, “Everything that can be invented has been invented,” the more complex the world becomes, the more problems there are to solve. That said, it’s got to be a big problem and a way better solution than what’s already out there. They invent concepts, not complete products. Ideas and inventions are fascinating, but consumers and businesses generally buy complete products they can actually use. There is a world of difference. The team does not have what it takes. Some founders just can’t get along. Others fall apart when the initial strategy fails, as it often does. Still others are out to make a quick buck and aren’t committed to working day and night over the long haul. Any VC will tell you, a big part of what they invest in is the management team. They listen to bad advice from the wrong people. With all the hype over entrepreneurship, the quantity of information has gone way up while the quality has gone way down. That means entrepreneurs are getting lots of bad advice from unqualified sources. The worst thing about it is, when they actually get good advice that conflicts with what they’ve been told, they don’t recognize it for what it is. Sad but true . Perhaps the most important advice I can give you is this: If your startup fails, it’s worth spending time to understand what went wrong. That’s the only way you’re going to improve the odds of making it next time. And, yes, there will be a next time. Hopefully this list will help you avoid a different pitfall. -- -- Centroids: The Center of the Radical Centrist Community <[email protected]> Google Group: http://groups.google.com/group/RadicalCentrism Radical Centrism website and blog: http://RadicalCentrism.org --- You received this message because you are subscribed to the Google Groups "Centroids: The Center of the Radical Centrist Community" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. For more options, visit https://groups.google.com/d/optout.
