Answer to Question #188247 in Management for Jaheeza Peerbocus

Question

Use real-life examples of failed start-ups to discuss the TEN (10) common mistakes made by small businesses which ultimately contribute to their failure. 

Answer 1

1. Poor planning is among the most common mistakes that many companies make. For instance, Quirky the air audio company started so well and failed to maintain its presence in the market mainly due to poor planning of operations, investments and partnerships.
2. Poor goal setting and organization results in poor quality and in-effective business operations. Companies that fail to identify SMART goals and objectives fail to administer products and services that appeal to the market (CBInsights, 2021).
3. Failure to understand the market causes companies to develop products and services that do not satisfy the market. For instance, Layer Inc. was a good startup providing cloud services. The failure of the company to identify the state of the market exposed the company to high competition ultimately leading to closure.
4. Unsustainable growth causes instability. Layer Inc. management pushed the company for quick profits without considering long-term objectives and wellbeing of the company.
5. Start-ups at times fail due to the lack of data. Companies like Essential Products failed because they lacked adequate research to understand how their products can be positioned to gain market share.
6. Overspending and underspending are two extremes where start-up companies should establish a balance. On the whole, LeSports failed due to high costs of operations (CBInsights, 2021).
7. Start-up fail as they want to do everything on their own. For instance, Homejoy failed due to overreliance on the team of the company to produce products and services even though they lacked the technical expertise.
8. Lack of sales affects all companies. Particularly due to the COVID-19 pandemic many startups have failed due to the lack of revenue.
9. Partnering with the wrong investors can high affect the business. Normally, investors shape the culture as well as the goals and objectives of a company. Failure to get the right investors leads to poor goal setting.
10. Poor management is a critical factor causing failure of start-up in the market. The manager plays a key role in how the company operates. This way poor management leads to poor planning, execution and monitoring ultimately causing failure.

CBInsights. (2021). 208 of the biggest, costliest startup failures of all time. https://www.cbinsights.com/research/biggest-startup-failures/