Everyone would like to give up their day job and work for themselves – especially if they can find a lucrative sideline that is both interesting and focused on their particular skills, experience or talent. Who doesn’t have the ambition of giving up the daily grind, sitting at home and watching the cash roll in?
Unfortunately that Utopian view of starting your own business is seldom a reality for those who try it. For all sorts of reasons (many of which will be discussed in the following pages) estimates suggest that anything between 75% and 95% of all new businesses fail.
So what is different about yours? If you are seriously thinking about going down the route of a business start-up you need to sit down and think very carefully about it. Then you need to think some more. And then you need to do lots of research. You shouldn’t even consider taking the first step without going through a rigorous process of assessment and feasibility. You might have the greatest idea in the world (you probably haven’t but let’s say you do); even then if you can’t make it economically, sell it, market it, move it, service it, develop it, compete with it and lots of other activities – the chances are you won’t be able to make much money from it.
This compilation will look at why start-up ventures fail and the mistakes that people make when going into this area. It also considers what you might do to minimize the risks of failure and how you should think through and plan your business strategy to give yourself the best chance of success. The different types of start-up business and the sectors that you might want to assess are also covered in some detail. Some areas are easier to get into and perform better than others – but these are likely to be the most competitive as well so all the factors need to be balanced in making your decision.
Nothing in this field is ever quite what you expect. Things cost more, take longer, are more difficult, more competitive or just not quite how you envisaged they would be. You can learn from others’ mistakes and research can help you determine whether there is a market for your product, whether anyone else is already producing it, what you could charge and provide you with other important market or business information that can help you in assessing the likely viability of your idea.
There is also important guidance on assessing yourself. Are you the right sort of person to start and run your own business? Do you have the determination, stickability, insight, judgement? Are you really entrepreneurial – some people simply aren’t. And do you have people skills, negotiating skills, managing skills – the traits that it will take to make something that can work and run. We might think we would make good business owners but how closely have we really looked at ourselves and measured our strengths and weaknesses in this respect?
Starting up a business is a big step, fraught with risk and very likely leading to at least one failure. Be sure you know what you are doing – and are armed with as much useful information and tools as you can find. If after all this you are still convinced you can make a go of it – good luck and make sure you learn as much as you can about the pitfalls and what you can do to foresee and forestall them.
Statistic Verification
Source: Entrepreneur Weekly, Small Business Development Center, Bradley Univ, University of Tennessee Research
Research Date: 7.27.2013
The reasons are sometimes complicated and not always clear why a certain business fails? Upper management, lack of funding, or just the free market phasing out unwanted items or services. Typically, startups have a casual attitude to promote efficiency in the workplace, often needed to get their business off of the ground. A new trend in failed startups is the purchasing of patents by what are derogatorily known as “Patent trolls”.
Industry | Percent Still Operating After 4 Years |
Finance Insurance and Real Estate | 58% |
Education and Health | 56% |
Agriculture | 56% |
Services | 55% |
Wholesale | 54% |
Mining | 51% |
Manufacturing | 49% |
Construction | 47% |
Retail | 47% |
Transportation, Communication and Utilities | 45% |
Information | 37% |
Year | Percent Failed |
Year 1 | 25% |
Year 2 | 36% |
Year 3 | 44% |
Year 4 | 50% |
Year 5 | 55% |
Year 6 | 60% |
Year 7 | 63% |
Year 8 | 66% |
Year 9 | 69% |
Year 10 | 71% |
Major Cause | Percentage of Failures | Specific Pitfalls | |
1 | Incompetence | 46% | Emotional Pricing |
Living too high for the business | |||
Nonpayment of taxes | |||
No knowledge of pricing | |||
Lack of planning | |||
No knowledge of financing | |||
No experience in record-keeping | |||
2 | Unbalanced Experience or Lack of Managerial Experience | 30% | Poor credit granting practices |
Expansion too rapid | |||
Inadequate borrowing practices | |||
3 | Lack of Experiences in line of goods or services | 11% | Carry inadequate inventory |
No knowledge of suppliers | |||
Wasted advertising budget | |||
5 | Neglect, fraud, disaster | 1% |
Leading Management Mistakes | |
1 | Going into business for the wrong reasons |
2 | Advice from family and friends |
3 | Being in the wrong place at the wrong time |
4 | Entrepreneur gets worn-out and/or underestimated the time requirements |
5 | Family pressure on time and money commitments |
6 | Pride |
7 | Lack of market awareness |
8 | The entrepreneure falls in love with the product/business |
9 | Lack of financial responsibility and awareness |
10 | Lack of a clear focus |
11 | Too much money |
12 | Optimistic/Realistic/Pessimistic |
Businesses with Best Rate of Success After Fifth Year | |
1 | Religious Organizations |
2 | Apartment Building Operators |
3 | Vegetable Crop Productions |
4 | Offices & Clinics of Medical Doctors |
5 | Child Day Care Services |
Business with Worst Rate of Success After Fifth Year | |
1 | Plumbing, Heating, Air Conditioning |
2 | Single-Family Housing Construction |
3 | Grocery Stores |
4 | Eating Places |
5 | Security Brokers and Dealers |
6 | Local Trucking |
http://www.statisticbrain.com/startup-failure-by-industry/
By Anton Stout on Nov 20,
As TechCity takes stock of 2 years of startups in London, Inside Startups looks at the UK’s startup scene in statistics. Here’s our mini November 2012 UK Startup census.
UK Startups Stand Up and Be Counted…
Startup Tracker is a great tool, monitoring the health of UK Startups. It’s stats record that in November 9,799 UK startups were born, part of the 424,161 created this year (BIS.gov).
The Growth of the Little (and Medium) Guy…
The SME world saw 38.7% growth from 2000 to 2012, that’s 3.5 million to 4.8 million UK SME’s, a 1.3 million increase (BIS.gov).
Being a UK Startup is Risky Business…
The UK is a cheap place to startup up according to Growth Business with 0.7 being the percentage of gross national income startup-cost for UK businesses, (compared with a global average of 20%). However, being a UK startup is a risky business with 1 in 3 businesses failing within the first 3 years. 20% of businesses fail within the first year, and in the next 3 years 50% of those fail.
So Get Advice…
A recent The Financial Times Guide to Business Start Ups found that 20% of failed businesses would still be in business after 2.5 years if they had sought advice at the outset.
It’s Hard To Find Funding…
There are currently 619,000 millionaires in the UK (2011), only 5% are Business Angel Investors (Barclays Wealth). VC cash is declining and the number of those that get it has always been small (some US stats put it as low as 1 in 99%) in the UK just 5% of investment goes in to Venture Capital.
But the government is waking up to the potential, especially for young entrepreneurs…
30,000: the amount of startups led by young people Prime Minister David Cameron stated StartUp Loans would create, 900,000: the amount of extra businesses the UK would have if it had the same rate of entrepreneurship as the US (BBC).
Tech startups are booming…
There are 3,000 tech companies in East London, employing an estimated 50,000 people (The Guardian). There’s still 2,700 unfilled jobs (Computer World)
Is the UK a hub for Social Enterprise?
It’s estimated 55,000 (89%) of social enterprises are located in urban areas one 5th are in London. The combined turnover of Social Enterprises is £27bn per year, contributing £8.4bn per year to the UK economy (nearly 1% of annual GDP) (Startups.co.uk)
Got more interesting startup stats? We’d love to hear them and add them to our UK Startup stat-check. Tell us in the comments below.
http://www.insidestartups.co.uk/blog/the-uk-startup-economy-in-numbers-nov-2012/
Wikimedia Commons
We love a good entrepreneurial success story — entrepreneur as protagonist overcomes obstacles and builds a thriving, successful company (and become wealthy while doing so). We want to hear about, learn from and even replicate what they’ve done.
However, this survivorship bias is problematic. Jason Cohen of Smart Bear Software does a nice job articulating this issue stating:
“The fact that you are learning only from success is a deeper problem than you imagine… drawing conclusions only from data that is available or convenient and thus systematically biasing your results.”
Luckily, the startup community often courageously shares their stories — even when things don’t end well.
This list was compiled by ChubbyBrain and was suggested by Founders @Fail.
This post originally appeared at ChubbyBrain. Copyright 2013.
Article: StoryLog, “How My Startup Failed”
Excerpt: There was no doubt about it: I had discovered The Next Big Thing. Like Edison and the light bulb, like Gates and the pc operating system, I would launch a revolution that would transform society while bringing me wealth and fame. I was about to become the first person in America to sell condom key chains.
Article: Marc Hedlund’s Blog, Why Wesabe Lost to Mint
Company: Wesabe
Author: Marc Hedlund
Excerpt: Even before we launched, we heard about other people working on similar ideas, and a slew of companies soon launched in our wake. None of them really seemed to get very far, though, and we were considered the leader in online personal finance until September 2007, when Mint launched at, and won, the first TechCrunch 40 conference.
From that point forward we were considered in second place at best, and they overshadowed our site and everyone else’s, too. Two years later, Mint was acquired by Intuit, makers of Quicken (and after Mint’s launch, the makers of Quicken Online) for $170 million. A bit less than a year later, Wesabe shut down.
Article: ArsDigita – From Start-up to Bust-up
Company: ArsDigita
Author: Philip Greenspun
Excerpt: For roughly one year Peter Bloom (General Atlantic), Chip Hazard (Greylock), and Allen Shaheen (CEO) exercised absolute power over ArsDigita Corporation. During this year they
Article: RiotVine Post-Mortem
Company: RiotVine
Author: Kabir
Excerpt: It’s not about good ideas or bad ideas: it’s about ideas that make people talk.
And this worked really well for foursquare thanks to the mayorship. If I tell someone I’m the mayor of a spot, I’m in an instant conversation: “What makes you the mayor?” “That’s lame, I’m there way more than you” “What do you get for being mayor?”. Compare that to talking about Gowalla: “I just swapped this sticker of a bike for a sticker of a six pack of beer! What? Yes, I am still a virgin”. See the difference? Make some aspect of your product easy and fun to talk about, and make it unique.
JOE MARINARO via Flickr
Article: The Last AnNounce(r)ment
Company: Nouncer
Author: Eran Hammer-Lahav
Excerpt: Nouncer wasn’t an easy idea to explain to people 2 years ago, especially since microblogging didn’t exist yet. Twitter, Jaiku, Pownce, and other services were introduced while Nouncer was being developed. The new services made it easier to explain and communicate the idea, but at the same time took away the first-to-market opportunity as well as added competition, and raised questions about the business plan.
As Twitter received more attention, clones showed up everywhere. My decision was not to compete with a new and already crowded space, but to find a different angle. I decided to focus on scalable technology, making a bet that once Twitter and others will get popular, there will be a real need for that kind of technology by other players...The business decision to focus on technology and avoid building a consumer application had a significant impact [on the eventual failure].
Article: My eHarmony for Hiring Failure
Excerpt: Then came the coup de grâce. The first article mentioned starts like this:
I spent an hour on the phone yesterday with yet another entrepreneur who imagined that the future revolved around the “eHarmony for Jobs.”(The idea was tired a couple of years ago.)
I couldn›t help but almost chuckle a little bit in embarrassment. My billion dollar idea, was summed up as annoying, and tired a couple of years ago. How could this have slipped by me?
Article: BricaBox: Goodbye World!
Company: BricaBox
Author: Nate Westheimer
Excerpt: I can tell you most of this decision [to close BricaBox LLC] revolved around issues of money, traction, team, and vision: the four essentials of a successful startup. I think it’s fair to say that a startup deserves to live if it has good quantities of at least three of those four things, and BricaBox is now out of all but one of them.
Article: Boompa.com Launch Postmortem, Part 1: Research, Picking a Team, Office Space and Money
Company: Boompa.com
Excerpt: While there are many documents on the web covering this subject, most are written after the fact of success and don’t provide the “holy shit, we just quit our jobs” perspective that is going to be common with anyone who doesn’t have the contacts to get involved with VCs. A year from now this story will either be a testament to our methodology or an embarrassing reminder of all the mistakes we made.
Juan Mann
Article: End of the Road for Xmarks
Company: Xmarks (company seems semi-dead given recent pledgebank setup)
Author: Todd Agulnick
Excerpt: For four years we have offered the synchronization service for no charge, predicated on the hypothesis that a business model would emerge to support the free service. With that investment thesis thwarted, there is no way to pay expenses, primarily salary and hosting costs. Without the resources to keep the service going, we must shut it down.
Article: EventVue Post-Mortem
Company: EventVue
Authors: Josh Fraser and Rob Johnson
Excerpt: Our Deadly Strategic Mistakes:
Our Deadly Cultural Mistakes:
Article: YouCastr – A Post-Mortem
Company: YouCastr
Author: Ariel Diaz
Excerpt: We started the company because we liked the idea and wanted to do something entrepreneurial. We weren’t in love with the idea or market we were going after, and weren’t core users of our product. We worked really hard getting it off the ground despite this, but it made it more difficult to sustain the energy and to understand the best product choices.
Article: Leaving IonLab
Company: IonLab
Author: Swaroop C H
Excerpt: Second, as one of my friends observed, I talked to about 7 people (both acquaintances and friends) whose judgment I trusted. 3 of them sympathized and agreed with my decision and 4 of them admonished me and asked me to “hang in there.” You know what was the clincher? The first 3 had done startups themselves and the latter 4 had not. The latter 4 did not really understand the context, even though they meant well and are intelligent folks.
Article: Lessons Learned
Company: Devver
Author: Ben Brinckerhoff
Excerpt: Most of the mistakes we made developing our test accelerator and, later, Caliper boiled down to one thing: we should have focused more on customer development and finding a minimum viable product (MVP).
Our mistake at that point was to go “heads down” and focus on building the accelerator while minimizing our contact with users and customers (after all, we knew how great it was and time spent talking to customers was time we could be hacking!). We should have asking, “Is there an even simpler version of this product that we can deliver sooner to learn more about pricing, market size, and technical challenges?”
Robert Thomson via Flickr
Post-Mortem Title: Lessons from Kiko, web 2.0 startup, about Its Failure
Company: Kiko
Author: Mahesh M Piddshetti
Excerpt: An AJAX calendar is not fundamentally a bad idea (I think we, Google calendar, 30boxes, calendar hub, and many others prove that). I don’t think we were doomed from the beginning; I just think we were too slow at times, and focused on the wrong thing at times. I think Kiko is still a good idea that can yield a lot of value to its users, but I won’t be the one to take it there.
Post-Mortem Title: Lessons Learned: Startup Failure Part 1
Company: Overto
Author: Pawel Brodzinski
Excerpt: The thin line between life and death of internet service is the number of users. For the initial period of time the numbers were growing systematically. Then we hit the ceiling of what we could achieve effortlessly. It was a time to do some marketing. Unfortunately none of us were skilled in that area.
Article: Monitor110: A Post-Mortem
Company: Monitor110
Author: Roger Ehrenberg
Excerpt: While we certainly made more than seven mistakes during the nearly four-year life of Monitor110, I think these top the list.
Article: Why We Shut NewsTilt Down
Company: NewsTilt
Author: Paul Biggar
Excerpt: None of these problems should have been unassailable, which leads us to why NewsLabs failed as a company:
Article: Aftermath
Company: Diffle
Excerpt: If I were to do another startup, I’d be stuck with it for the next 4-10 years, it’d have to be profitable within about 2 to avoid running out of money, and this is all in a very uncertain economic climate. And I have no cofounder, so I’d be doing everything myself until I could afford employees, and then I’d have to build a company culture. There’s no fun in that - I might be able to pull it off and get rich, but it’d eat up all of my twenties, probably all my friends, and possibly all my sanity. Not worth it
timparkinson via Flickr
Article: 6 reasons why my VC funded startup did fail
Author: Stephan Schmidt
Excerpt: So the most important thing is to sell – a fact lots of startups forget. And we did too. After much thought it comes down to these six reasons why we failed (beside the obvious one that the VC market imploded when we needed money and no one was able to get any funding):
Article: 10 Lessons from a Failed Startup
Company: PlayCafe
Author: Mark Goldenson
Excerpt: I would advise any entrepreneur or investor considering content to think twice, as Howard Lindzon from Wallstrip warned us. Content is an order of magnitude harder than technology with an order less upside; no YouTube producer will earn within a hundredth of $1.65 billion. This will only become more true as DVRs and media-sharing reduce revenues and pay-for-performance ads eliminate inefficient ad spend, of which there is a lot. The main and perhaps only reason to do content should be the love of creating it.
noisiestpassenger via Flickr
Article: Lessons from our Failed Startup
Company: SMSnoodle
Excerpt: Discuss your startup idea with not only friends, but also other people who are quite strangers to you. I promise you will definitely learn a lot here.The concept of your idea getting stolen is 99.99% impossible.Visit barcamps, hackerspace, geek terminals and bounce your ideas to different people.
We failed to do this step and hence overestimated the Singapore market.
Article: Untitled Partners Post-Mortem
Company: Untitled Partners
Author: Jordan Cooper
Excerpt: Our hope was to aggregate demand around works of art being sold through the existing channels in the $70B art market, and then to enable our customers to cooperatively purchase and own the art they loved. On March 9th, we made the difficult decision to shutdown the Company and return almost 50% of the capital we raised to our investors.
Steve Wampler via Flickr
Article: Key Lessons from Cryptine Networks’ Failure
Company: Cryptine Networks
Author: Andrew Fife
Excerpt: No matter how close of friends, how much you trust each other or how good your intentions are, money comes between people and everyone over-estimates their own contributions. Furthermore, founders become highly emotional about their companies. Thus, the process of negotiating taking back stock from founders is not rational and inherently very difficult. However, vesting schedules reduce the difficult negotiation to simply and mechanically exercising the companies pre-agreed right to repurchase stock at the price it was issued. I foolishly let myself fall into the “it won’t happen to me” trap but no startup gets it right on the first try and theses hiccups often lead to changes in the team. Believing that any startup won’t have to deal with stock vesting issues is totally unrealistic.