Newvick Lee
12 Jun 2017

2 simple reasons most new businesses fail

WRITTEN BY ROY OSING

Some say 9 out of 10 new businesses fail. 

Others say 50% will not make it 5 years. 

Ignore the precision of the numbers and you are left with the inescapable conclusion that when you start a business there is a very good chance you will fail.

Why is the mortality rate so high for startups?

These four explanations are typically used to explain failure.

a) They don't have sufficient financial resources; they run out of money. They are unable to attract enough investors who believe in their idea. The founder is no longer able to continue at "zero pay".

b) They don't have people with the marketing competencies required to turn the new "brave idea" into a market reality. They are unable to communicate a value proposition that captures the attention of their audience and entices them to support it.

c) Their product doesn't address a compelling market need; the problem it is solving is not easy to explain. It doesn't resonate with anyone. People have to think too much. 

d) Their solution is basically the same as their competition. There is no differentiation; it's not distinctive or unique. Cover your eyes and the solution provider could be any one of a number of players in the market.

All choices are contributing factors to be sure, but the main culprits are first, a product that doesn't capture the imagination of the target market and second, the absence of clear competitive differentiation. 

Without a compelling solution and a value proposition that stands out from the competition you will undoubtedly fall victim to the grim reaper sooner or later.

Two questions that startup leaders should ask themselves:

 1. "What common problem (i.e. virtually everyone is aware of it) does my product solution solve?" How easy is it to explain?  To people "get it" right away? Is it intended for a large segment of the market, or a small specialized group?
If it takes an hour to describe how your solution "talks to" the problem, and if it is targeted to a small specialized niche, you could be in trouble. 
People are attracted to products that have broad social appeal. It doesn't take long to explain, for example, why a solution to "distracted driving" would be valuable to have.

 2. "Why should a potential customer do business with you and no one else?" The world is full of hungry competitors; what makes you special enough to have potential customers consider you and ONLY you for the solution you provide?
If you can't clearly separate your solution from the competitive herd, you will be invisible and go unnoticed - and your money will most likely run out.

If you offer a "no brainer" solution to a problem that the world understands and if you are the ONLY ones who offer it the way you do, you will have a long and rewarding business life. 

If not, join the statistics.



Roy Osing (@royosing) is a former President and CMO with over 33 years of leadership experience covering all the major business functions including business strategy, marketing, sales, customer service and people development. He is a blogger, content marketer, educator, coach, adviser and the author of the book series Be Different or Be Dead.

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