Starting a business and steering it to success is not an easy feat. In 2019, the failure rate of startups was around 90%. And according to research from the U.S. Bureau of Labor Statistics, 20% of new businesses fail within the first two years, 45% fail within five years, and 65% within ten years. Only 25% of new businesses last for 15 years or more.
Many startups fail before they break even due to lack of money, lack of research, poor strategies, bad partnerships, and wrong marketing strategies. If you want to steer clear of failure, look at what these failed startups did wrong and avoid it.
- Shyp: It’s Important to Revise Your Strategy
Before Uber and Doordash became the big companies they are today, there was a logistics startup known as Shyp. Launched in 2013, the company was forced to close its doors in 2018 due to poor strategy.
The company's business model made it easy for customers to deliver packages around the world with just two clicks. Once it started getting top media coverage, it received a lot of investment capital. However, the team was more fixated on the growth capital than on the trade volume. This led to its downfall.
- Juicero: Test Your Market First
The only way to know if your product will be well received in the market is by doing market research. Find out whether there’s a gap in the market your product will address--and if consumers will like the product.
This is the grave mistake that Juicero made. It designed a $699 Wi-Fi-connected luxury juicer that needed proprietary juice packs. The company shut down 16 months after its launch because it failed to do market research.
- PepperTap: Manage Customer Acquisition
Customer acquisition is one of the top goals for any business. However, you must know how to manage customers, not just acquire them. Avoid making the mistakes PepperTap made. The startup had a simple business model: to deliver groceries to customers anywhere at the touch of a button. But its app developed integration problems because the company onboarded too many partner stores too quickly.
In addition, the discount model it used to attract loyal customers led to huge losses. What does PepperTap’s failure teach us? That it’s important to give reasonable discounts--whether you’re managing a business that allows customers to get a title loan online or selling physical products.
- Sprig: Profitability is Key
Without profits, your business is doomed. Learn a lesson from food delivery startup Sprig. The company shut down in 2017 after its on-demand food business failed. Despite getting a lot of funding, it couldn’t make profit from single deliveries.
- Beepi: Manage Your Finances Well
If your business runs out of money, you won’t be able to pay salaries or sustain operations. Good financial management is crucial if you want your business to survive. Beepi, a car marketplace, learned this the hard way. It had to close shop due to mismanagement of funds. The company executives paid themselves high salaries and focused on buying expensive furniture, which ate into the profits.
Failed startups help entrepreneurs to learn many important lessons. If you want to build a successful business, avoid these mistakes and make better decisions.