Top 10 Reasons Why Startups Fail and 10 Minutes
a Day Plan to Deal With It

More than 90% of the startups fail within the first three years of their establishment, so initiating a business is not an easy task to perform. However, what smart entrepreneurs do is learn from the mistakes committed by others. 

startups fail

Here are the top 10 reasons, followed by action plan to prevent, from Collaberos Consultants with decades of experience in fortune 100 companies and startups.

Our consultants have drawn up an effective action plan implemented in Collaberos member startups. Each of them are precise actionable guidelines that you can implement in around 10 minutes.


1. Know Market Need 

The primary thing that drives every startup is the market. When you are about to establish a start-up, you must look at the opportunity gap or unsolved problem of the market, which can be further fulfilled by your business. 

Only, this is going to make you decent money. However, that is the catch –to identify the problem of the market. 

Plan to deal with the situation:

Contact your relationship manager to engage SurWayteam 

  • Interact with the mentors in your industrial niche
  • Perform secondary market research
  • Include primary market research as well, i.e. if you are in stealth mode –you could opt for developing an alternate brand or build ties with another business firm working in the same niche to sell your products, and if you are not in stealth mode, primary market research is going to serve as your ultimate market outreach
  • Repeat these steps once the MVP is ready, 
  • Understand your customers better and built an affiliation with the market for the availability of possible options


2. Ran Out of Cash

One thing that keeps business buoyant is the flow of cash. No matter how domineering your idea could be for the market, or how passionate you are regarding the establishment of your business, you need the flow of cash to keep your business sustained. 

Plan to deal with the situation:

Engage mentors on to:

  • Draw up a crystal clear business plan before you establish the start-up, review it time to time.
  • Review your business plan regularly on a monthly basis
  • Run your business plan by the accountant as well as get advice from a mentor with experience
  • Leverage longer credit terms available only for Collaberos members.


3. Not the Right Team

One of the primary factors is –the management of the company. Poor management or lack of appropriate administration is often exemplified as –communication gap between the team and the manager, the decisions taken are based on weak strategies.

Plan to deal with the situation:

Engage mentors on for consulting and:

  • Hiring an experienced HR manager and review your team adequately
  • Setting the culture of your company first
  • Professional help can be taken for personality analysis of the employees and team dynamics among them
  • Setting up guidelines and policies for the whole team
  • Leadership training for partners is essential


4. Get Out-Competed

One of the essential aspects of getting along with a company is its marketing strategies. How creative you can get with the marketing strategies is going to decide the future of your business. 

In today’s scenario, it isn’t just essential to spread awareness about your product but to influence your potential audience with the features offered. 

Plan to deal with the situation:

Engage to keep analysing competition every few days

  • Keep track of your competitors
  • Exhaustive competitive analysis is essential too


5. Lose Focus

The founders of a business are generally people with creative minds. And more often than not, they get carried away in the ocean of their ideas. 

However, as necessary, a great idea is for the initiation of a business, getting carried away in order for wanting more of it could be equally harmful. 

Plan to deal with the situation:

Engage to

  • Get help from an experienced mentor for frequent reviews
  • Prepare a detailed business plan, which needs to be updated regularly
  • You need to have peer groups as well to get regular feedback 


6. Product Without a Business Model 

The skeletal structure of every business is its model, which will further dictate the economic and commercial stability of a startup. 

More often than not, startups get too indulged in finding out new solutions to the market problems that they overlook the primary structure of their business model. And, this further leads to failure. 

Plan to deal with the situation:

Engage business mentoring and consulting for 

  • Creating a business roadmap.
  • You could inspect your business model with the help of an expert from your industrial niche and CPA
  • Make sure to compare your products with the others prevailing in the market


7. Disharmony Among Team/Investors

The business is obviously run by human beings. And as the famous quote says “to err is human”, the team members might get carried away with emotions. 

However, in the world of business, there is no place for emotions. Yet you cannot be too self-centered when it comes to the establishment of a successful business firm. 

Plan to deal with the situation:

Engage to 

  • Get access to potential partners, team members and advisors
  • Appoint mentors who can help you solve such situations
  • Make sure to identify the differences and then come up with strategies to prevent the discord
  • Major decisions and pivots should be discussed in regular meetings


8. Legal Challenges

Every business must have understood how vital data security and customer privacy is after recent incidents about Cambridge Analytica and Facebook. Startups every day, get exposed to legal challenges and often fail to counter them adequately. 

Plan to deal with the situation:

Engage to get help and 

  • You must include a legal expert and CPA on your advisory board, or you could hire help for legal matters


9. User-Unfriendly Product

With the introduction of products that are highly customized according to the needs of the users, people have grown to be very spoiled. If your products are unable to deliver the same level or more enhanced features, it is difficult to attract potential customers. 

Plan to deal with the situation:

Engage product expert

  • UX should be part of the initial analysis
  • Also, UX should be part of your budget
  • Initial testing of the UX should be implemented, right when the MVP is set or from an even earlier stage
  • Focus groups should be appointed to give you earlier feedback


10. No Financing/ Investor Interest

In the initial days, almost all the startups agree to work on credit, which further gets worse for the future of the business. Also, sometimes startups fail to gather adequate financial help, which often leads to failure. 

Plan to deal with the situation:

Engage virtual business incubator

  • Focus on finding investors from a very early stage
  • You must continue to brand for your company among investors to develop familiarity
  • Get feedback from the investors
  • Establish networking with investors and develop a rapport 



After conducting ample research, we have come up with the top reasons that contribute to the failure of a startup. You must make sure to read the entire article to know about those mistakes in advance and also get the solutions to counter those issues. If you further come across any other situation, which might lead towards the downfall of your business, feel free to talk to our experts to receive sound advice.

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July 16, 2020

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