7 Key Reasons Why New Business Startups Fail


85% of new business startups fail within the first year in the developed countries of the world where the culture supports and protects new businesses. If that happens in developed countries, you can be sure the number will be very much higher in Nigeria where you have to deal many issues like; limited startup funding, endemic corruption, lack of protection for new businesses etc.


Starting a new business is one of the hardest things to do in life because it offers the least security. Certain things have been found to be responsible for the failure of most new business startups, below are the top 7.

No market need

All successful businesses offer products and services that meet a particular need in the market. The first habit that kills most new business startups is creating a product or service for which there is no market need. If there is no need for your products or services, you’ll be forcing yourself on potential customers and it doesn’t often end well for the business.

Before you initiate a new business startup, it is smart to conduct market research to confirm if the need you want to meet really exists. You also need to validate your idea of the need to ensure that people will actually pay you to have such needs met.

Running out of cash

The second thing that kills most new business startups is running out of cash before breakeven or breakout. When you start a new business, you’ll invest money on capital expenditures (land, equipment, raw material); however, there’ll be some recurrent expenses (workers’ salaries, power, & transport bills) that you must cover aside from the capital expenditure.

If you run out of working capital before your business breaks even, you’ll most likely start accumulating debts or eating into your capital to keep the business alive, and the business is as good as dead. Before you launch your business startup, after doing all your capital expenditure, you should set aside enough money to cover at least six months of recurrent expenditure.

Not assembling the right team

When the founders of a business fail to assemble the right team, it can lead to the failure of the business. Depending on the scope and size of your startup, you’ll need people to handle the core areas of product development, marketing, and management. The business is not likely to succeed if you don’t have experts handling any of the core areas.

People tend to hire family, friends, and relations without checking to see if they will bring any tangible value to the table. The business is also likely to suffer if there is interpersonal conflict between the team members. Hence, it is important to hire people with the right skillset and to make sure that they don’t have differences that could lead to acrimony.

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Getting outcompeted because of poor products

The business world is a world of stiff competition. If your business has a competitor who has superior products, your business may be in danger. Unless your product or service is protected under patent laws, the success of your idea is likely to bring competitors into your niche. If you have not invested much into research and development to offer the very best product possible, your competitors might kick you out of business by offering products with superior qualities. When was the last time you heard about ‘Maxam’ toothpaste?

Poor Marketing

An excellent product or service that meets a particular need doesn’t do anybody any good if the market doesn’t know about its existence. Many new businesses underplay the importance of marketing their products and services because they were busy with other important things. They tend to wait until they have the perfect product before they start marketing – the result is a warehouse full of products that no one is ready to buy.

Before you launch your product or service, start your market activities to build buzz around your product before it enters the market. The buzz will help you generate great sales when you launch and having great sales on launch will boost the morale of your team.

Ignoring Customers

The customer is king and your business is not likely to go far if you don’t treat your customers as such. Many new business owners are busy chasing funding, new leads, and expansion plans that they forget their current customers. Pay attention to your customers and they’ll be loyal to your brand. Paying attention to your customers will also provide you with valuable feedback for improving your product and services. The customer remains king, ignore him at your peril!

Pricing Cost Issues

Another important habit that can kill new businesses is pricing cost issues. Pricing cost issues arise when you can’t offer the best value for money. The following pricing cost issues are available

Premium Product – Premium (Expensive) Pricing:

Basic Product – Basic (Cheap) Pricing:

Average Product – Average (Moderate) Pricing:

If you are offering a premium product, make sure that you offer it at a premium price otherwise you’ll be operating at a loss soon enough. If you are offering a basic or average product, don’t offer it at premium prices otherwise nobody will buy from you.

Source: nigerianbulletin


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