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Why do 90% of startups are ending up in losses?

It is a proven fact that only 10 out of 100 new businesses are becoming successful and the rest 90 are out of the scene in one year time period. Have you ever thought about the reason for the failure of those majority businesses? In my professional life I had helped more than thousands of companies to get incorporated and found that the aforementioned figures are realistic to a greater extend. This ratio had raised my curiosity level for tracing out the reason for such a high failure ratio and finally arrived at following reasons.

Lack of Planning

There is a renowned saying that, the failures are stepping stones to success, but many failures in the corporate field are happening due to lack of planning. Many of the entrepreneurs who are coming forward to start a new venture does not have proper planning, even though they are having an unique business idea in their mind. If someone is dreaming to start a new business, they should plan the entire course of action and put it in papers and validate that several times with the help of professionals and experts from the respective field.

Lack of Financial Knowledge

This is the next prominent reason behind the business failures and one should try to gain thorough knowledge in the financial aspects of the business which they are planning (dreaming) to start. The aspirant has to prepare well to understand the financial implication behind their decisions and should also develop a clear idea about the costing and related matters. Many of the people are not bothered to spend their time on proper financial planning and many are comfortable with their day dreams.

Lack of Knowledge in Law

To become a successful entrepreneur one should be well versed with the provisions of the laws applicable to his business. Ignorance of law is not an excuse but many of us are not bothered to understand the laws that are applicable to our business and is giving least importance to the compliance. During my professional life I heard numerous times from various entrepreneurs that, they will streamline their legal documentations, once their business start performing. For many of us it is a vicious circle and no one knows which comes first and which one needs priority. I would like to clarify that as an entrepreneur, one should give equal importance to the Governance and business as both are required to attain the excellence in the field of business.

Lack of Vision

I had noticed in many cases that, many of the entrepreneurs are finding it difficult to answer the questions on their five year plan. It is a surprising fact that many of the startups do not have a long term vision or goal rather than a short term goal. It is very important to a business to have a proper plan of action and to have an efficient leader to lead the organization towards that goal.

Lack of a Mentor

While entering into the field of business, many of us will not have a clear idea about the do and dont’s , ways for structuring of the business, branding and its positioning, financial and legal compliances, corporate governance, aspects for taking the business to next level etc. If the entrepreneur can identify a good mentor for their business, he will be able to handhold and advise the entrepreneur towards right direction. Mentor is not a ‘God Father’, but he is a “hand holder” to guide you whenever you need assistance.

The aforesaid reasons can be easily identified and resolved if there is proper mentoring and I believe that the same will bring change in the success to failure ratio mentioned in the beginning of this article.

Authored by Bijoy P Pulipra

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