Know The Top 20 Reasons Why Startups Fail

reasons why startups fail in nigeria

In the past few years, Nigeria has experienced 61% of the startup’s failure in the business sector, so we make findings to know the reasons why most startups fail.

Most startups in Nigeria barely makes it to the next stage of business before going down the drain.

Yes, there are great untapped business markets in Nigeria, Africa but there are other factors that make it possible for these businesses to strive.

Here are 20 Reasons Why Startups Fail

There are various reasons why startups fail within a short time of their existence and this failure has been recorded over time through most field market surveys, we have about 20 of the reasons below;

reasons why startups fail

1) No market need:

It is worth of mention that one of the crucial and important reasons why startups fail in Nigeria is lack of market need as it has been rated 42% out of 100% reasons why startups fail.

Most startups can’t really come up with the need of their current environment. They are somehow confused as regards detecting the market need and end up choosing products or services that are not applicable to their present environment.

2) Ran out of cash:

it is not an understatement to say that money answers all. Some startups in Nigeria fail because there is no capital to start up or they have exhausted their start-up capital which might eventually lead to the suspension of business activity or a total close down of such business.

Businesses in Nigeria needs cash to function effectively and also produce the desired results. Lack of cash can frustrate young entrepreneurs or startups out of business.

3) Not the right team:

It takes two to tangle, so they say. This then means that without agreement it is impossible for them to tangle. This is also applicable in business, only people with like mind, the same idea, and business goal can function effectively.

Most startups fail because they are not with the right set of people that can move the business forward or make it grow. When business isn’t with the rights and like-minded people it will fail.

4) Get Outcompeted:

The beauty of any business in the market is competition. Businesses compete with one another on which one remains in the spotlight.

When a business gets out-competed in the sense that it can no longer compete with his mates, such businesses will fail. 19% of startups fail on this note when they are unable to compete with their fellow startups or strive in the environment.

5) Pricing/Cost issues:

startups in Nigeria sometimes fails due to pricing and cost issues. They are torn in between the market price, customers desired price, and cost price.

Owing to the fact that they want to please their customers or clients and also fits into the market, they drop their price so low that it might even be lower than the cost price. The side effect of this is that it reduces the capital and might eventually lead to Loss which in turn might lead to the closedown of such business.

6) Poor product:

The originality of a product determines the rate of its patronage it gives customers or clients the confidence and the joy of patronizing a business over and over again. But in a situation when a product is poor in quality people will not want to patronize such business anymore. And when there is no patronage such business will remain stagnant and un progressing.

Poor products is a major reason why startups in Nigeria fail people will prefer to patronize a business with good product quality even if it is expensive over a business with poor quality and cheap product.

7) Need/Lack of business model:

most startups in Nigeria lack the idea of how business is supposed to be operated and incur a profit.
The chain of business model include manufacturer, distributor, retailer, and the final consumer when a business is unable to capture the value expected of it, it will surely fail.

reasons why startups fail

8) Poor marketing:

about 14% of startups fail because of poor marketing. It is quite logical to say that advertisement is the soul of business. A business that lacks a marketing strategy will fail. Startups who fail to introduce effective marketing strategy one of which is advertising, will not strive in the market as there won’t be aware of the goods and services neither will it be accepted in the market.

9) Ignoring Customers:

Most startups fail because they don’t pay attention or probably unintentionally ignore eligible customers. It’s important that startups identify the target audience so as not to lose the opportunity of selling their products.

10) Product Mis-Timed:

In business there are different selling time for different products. Some as seasonal while some are not most startups produce and intend to sell products At the wrong season. Mis-timing of products by startups often lead to its failure.

11) Lose focus:

one of the reasons why startups fail in the past years is as a result of loss of focus which surveys stated to be about 13%.
Startups at some point lose focus and deviate from the sole aim of establishing the business and the void it initially wanted to fill. Loss of focus is a major contributor to the failure of startups in Nigeria.

12) Disharmony on team/investors:

some startups in Nigeria also fail due to lack of agreement or lack of unity among the team or the investors.
No business can exist in isolation when a business team refuses to cooperate such business will not grow and will end up eating the rock bottom. This is one of the reasons why startups fail and have been mostly neglected by entrepreneurs

13) Pivot gone bad:

when a business’ intended strategic plan goes wrong, such business will definitely fail.
Lots of startups fail because they refused to study their business and know what type of pivot works for them and that is capable of making fundamental changes in their businesses so as to achieve their aim and objectives.

14) Lack of passion:

Passion as defined by Wikipedia is a compelling desire for someone or something. This is so much needed in business so as to keep the business moving. Startups tend to fail if there is no passion which serves as a fuel or driving Force for business. several businesses have failed due to this reason.

15) Bad location:

Lots of entrepreneurs have refused to put the factor of location into consideration and have made them close up untimely. Location sometimes determines the products. Owing to this fact, when startups choose a bad location or a location where the goods and services are not needed such contribute to one of the reasons why startups fail in their business.

16) No financing/investor interest:

it is the desire of every investor to make profit from their investments. But when the profits or interest isn’t forthcoming they become discouraged and are forced to withdraw. This has in many cases caused the failure of some startups in Nigeria.

17) Legal challenges:

legal challenges can be frustrating for some startups in Nigeria. Some legal challenges include obtaining a license, trademarks shareholders agreements, patents and copyright issues, and lots more. All these are some of the legal issues that might make startups fail or close up.

18) Don’t use network/ Advisors:

Every business is expected to have an adviser either legal or close by. Some startups fail to engage the services of a network or advisor or discard their suggestion thereby leading to their failure.

19) Burnout:

Burnout is another important reason why startup fail can sometimes be attributed to physical, emotional, and mental exhaustion experienced by start-ups due to prolonged stress. Burnout is in stages it could be the honeymoon stage, the onset of stress, chronic stress, and lots more. The above can cause startups to fail.

20) Failure to pivot:

pivots are necessary for business so as to avoid failure. But when startups fail to pivot or create a significant strategic change, such business will fail. 7% of startups fail to pivot thereby failing woefully in the business.

The above-highlighted points are some of the reasons why startups fail. It is therefore advisable for startups to put some measures in place to avoid failure as most of the highlighted proven reasons are something one can avoid.

Some of the measures include avoiding stress and taking a lot of rest, identifying their audience, establishing business processes, understanding market needs, and lots more. It is also advisable for startups to turn to some organizations such as Startup Nigeria for mentorship program funds and training programs.

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