Start: The Number-One Reason Startup Businesses Fail

Why do some fledgling businesses succeed while others tank? If you could answer that question with one simple thing, wouldn’t it be easy to avoid doing it?

Well, The Startup Genome Project thinks it has the answer. The organization recently took a look at more than 3,200 startup businesses to try to determine the factors that go into startup success and failure. Their findings, published in The Startup Genome Report, identified one overarching reason why small startups fail: premature scaling. In other words, trying to get too big, too soon.

What are some of the mistakes you can make when you’re trying to scale too fast? You might waste lots of money on marketing, without taking the time to find out if your target customers really want what you’re selling, or how you might modify it to make them want it even more.

You might add features that are “nice to have,” but not essential to your product or service, without taking the time to really understand your customers and find out if they actually need these features.

You might hire too many employees too soon. And you might get stuck in tunnel vision, focusing solely on scaling your business and not noticing other opportunities that could prove more profitable in the long run.

So what’s the opposite of scaling too soon? Taking your time to “discover” was an essential characteristic of successful companies studied by The Startup Genome Report. The authors note that successful startups spent most of their time “discovering who their customers are, whereas … startups [that were unsuccessful] focused on validating that customers want their product.”

“Don’t underestimate how long things take,” the report’s authors warn. The study found that most startup entrepreneurs dramatically underestimated the time it would take to validate their market (that is, to get the product into customers’ hands to confirm whether they actually wanted it). On average, this step took two to three times longer than startup founders expected.

Time is something that few startups feel they have enough of. But in this case, it seems, taking a little more time to get it right before you try to grow your company can make all the difference between success and failure.

Getting the help you need is another thing that can make or break your business. Visit SCORE’s website to get matched up with a SCORE mentor and get the help you need to grow.

Rieva Lesonsky
<p> Rieva is CEO of GrowBiz Media, a content and consulting company specializing in covering small businesses and entrepreneurship. She was formerly Editorial Director of Entrepreneur Magazine and has written several books about small business and entrepreneurship. <br /> <a href="" target="_blank" title="GrowBizMedia"></a> | <a href="" target="_blank" title="Rieva on Twitter">@rieva</a> | <a href="" title="blogs by Rieva">More from Rieva</a></p>


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