Why Start Ups fail?

Why Start Ups fail?

Over the past few months I have been interacting and advising some of the startups. I came across bright energetic people with lots of innovation and creativity having brilliant product plans.

With these plans they approach to a VC or an Angel Funder and if their products are innovative and technology driven , they usually get their funding arranged in parts and phases.

So with a brilliant product plan and availability of funds and with lots of hope they start their dream project and in most of the cases they are very successful in creating their product timely.

So What happens next ?

Well I was really surprised when I came across three distinct findings-

1. 99% of these Start Ups fail.

2. There are  0.75% of them who are successful and grows to a turnover of  INR 200- 300Cr mark.  They have enough fire in their belly to grow bigger and aspire to become 1000 cr company. But 95% of them end up struggling on how to get there and in the process ends up hiring and firing business heads without any tangible results year after year !!!

3.Only 0.25% makes it really big , creates their brand and doing extremely well and all the successful names which we hear and see falls in this 0.25%!!

So what are their differentiators ?

What is making these guys so successful than the remaining 99.75% ?

The above two questions haunted me like hell and I bumped into my few successful start up friends and went deep, very deep to understand that one , two or three areas of differentiation which the 99% should replicate.

The key findings are –

1)      The 99% start ups exhaust their funds in creating their products . They get extremely emotional about their products and tends not to share or discuss with anyone.

2)      While the business plan carries a phase wise sales targets , they are unable to create the correct Go To Market Strategy for their product line – Which strategy will make their product sale ? Is it B2B, B2C , Retail , Distribution or something else?? There is a big struggle here.

3)      And if in some cases they frame the correct GTM, they have exhausted their funds to execute their sales in the market  and the VC is not ready to fund further since they have not achieved their phase wise target .

4)      This continues for long as the Sales assumptions taken during making the business case in excel sheets hits reality on ground. When reality hits, you neither visualize your growth opportunities, nor able to see any potential threats to your business. If you did, you don’t have contingencies in place.

Most of the start ups are struggling with the 4 hard core reality today .

The differentiators with Successful Start Ups are :

1)      They keep 50 to 60% of their initial funding to create a robust Go To Market Strategy and Execute that strategy on ground. The product costs never exceed 40% to 50%.

2)      They make their Sales coverage Strategy right . They get an outside in perspective of understanding market and competitive scenario. They discuss and consult with key industry players in length and incorporate their advises rather than keeping their products within their secret chest. They identify  which market to penetrate and which organizations to attack in a planned manner and have clear 3 - 6 - 9 - 12 month mile stones . They have a clear contingency plan and shift their GTM to plan B or C if they don’t achieve their desired results in their respective milestone deadline.

3)      And for organizations who dreams to get to a 1000 cr empire from a 300 cr needs to challenge status quo and embrace a change in their own approach , their own thought process and agree at a realistic timeframe of growth . They need to be SELF AWARE first and admit the gaps . They need to first realize whatever formula has given them growth in the past might not translate into growth in the future. Plans need to be revisited and reworked time and again depending on market dynamics and competitive landscape.

With all the studies, on ground knowledge and discussions with successful start Ups, my advises to all budding entrepreneurs  are as follows :

1.    Every business needs a Strategic Plan – a carefully thought-out road-map for your business starting from your vision and goals, their rationale, and how these goals will be achieved. A good strategic Plan is based on hard facts, sound market intelligence, and clear insight. Careful analysis and data-driven decision making is at the core backed by technology transformation.

2.    The first step starts with creating a business plan . Don’t create any business plan in an excel sheet to satisfy your financer . Create one which is data driven, realistic, achievable and you yourself believe in it not emotionally but passionately and logically. Do ensure the business plan captures the customer analysis, competitive analysis, correct GTM and financial analysis which is clearly backed by a passionate team for execution.

3.    Does your revenue target look highly ambitious to you? What’s the tool you have used  to set correct revenue targets. Are your sales targets an aspired guess work without any science or market knowledge?  Ideally from a strategic perspective you need  to know the market segments and industry CAGR and work on the segments that are your best growth opportunities. First identify that- then set your targets.

4.    Please note any business environment or industry behavior is dynamic and very competitive. Conditions can change rapidly anytime. You will need to factor in this aspect while making your short and long term goals.

5.    This is for the 300 Cr company aspiring to get to a 1000 cr mark. If sales have been flat for years and you are out of ideas on how to turn things around, it is time to go back to basics. A structured planning process takes you through a comprehensive review of the company and business conditions. Developing a strategic plan reinvigorates the business, wakes up the board room, and creates a clear path to the future.

Well – to summarize – here are the check points one need to be absolutely clear about -

Ø  Well defined short and long-term sales  goals

Ø  Enough funds to execute the on ground sales priorities.

Ø  Target customers markets to pursue and exit

Ø  Improved competitive position-How to manage competition.

Ø  Better use of resources- Efficiency improvements.

Ø  Correct Go To Market Structure and Strategy – short and long term.

Ø  A clear action plan for implementation. Execution on ground .

Ø  Creativity and innovation to mitigate Sales Risks and Crisis Management through technology transformations.

Ø  Better prepared for the future- Contingency plans

Ø  Organizational Capability Building

   Mr Start Up- You have shown enough courage – You Dreamt , You Dared  – Its now time to Dominate the Market . The market is full of opportunities – just take the Initiative , Change the Rule and Create the Future.