If you search for a failed startup list on the internet, you will be amazed at what you’ll find.
I did my research to research the failure rate in the startup industry, and here is what I found – 2 out of 10 startups fail within the first year of starting, and by the fifth year, the number reduces by half. Only one-third of businesses get to boast of remaining in business for ten years (source: The Motley Fool).
It made me realize that as an entrepreneur starting a new business, the odds are against you from day one. Therefore, if you feel your business has failed or considering throwing in the towel, you are certainly not alone.
And – it is not the end of life for those witnessing business failures. Before I move on to what entrepreneurs do after they have failed, let’s take a quick look at why Businesses fail in the first place.
Why Do Businesses Fail?
According to While CBINSIGHTS, there are a couple of reasons for businesses failures, the top ones being:
- Diving in without proper investigation
A lot of people fail in business because they decided to join a moving trend. For instance, they read that the real estate business is booming, and they choose to join the bandwagon without first checking its pros and cons.
And then, after few months, they find out that the business wasn’t as rosy as it was painted.
Some people have indeed made it big by following popular trends. But if the market is already saturated and you did not care to carry out the proper research first, you might end up with disappointing results.
- No need to fulfil
The main thing that keeps businesses running for a long time is if they have a need they are fulfilling.
A power-generating company might not go out of business because people need power.If a startup cannot solve a problem in a scalable way, it will fail. It doesn’t matter the technology, expertise, or employees available.
The simple logic here is – find a gap or a need and strive to fulfil it profitably.
- Lack of capital
There are different schools of thought on the idea of borrowing to fund a startup. Let’s just say that starting with your own money is safer than borrowing with no way to pay it back.
The truth is that you cannot keep funding your business from your money. The business should be able to sustain itself after a while.
If this is not the case, then the chances of such business holding sway for long is very slim. To back that up, 82 percent of business owners owe their failure to issues with cash flow(source: fundera.com).
- Poor or no marketing
There is a reason Coca-Cola and Pepsi always invest so much money into advertising. Even though they are popular brands, they understand the need for brand awareness – putting it right in our faces.
Marketing can make or mar a business, especially a startup. Regardless of your locality or type of business, people need to be aware that you have such a product or service to offer.
While the amount that needs to be pumped into marketing differs for each business, there is no doubt that marketing goes a long way in determining how long a business can last.
You can’t expect the same business model that worked for you 10 years ago to remain viable today. Trends, technology as well as peoples’ need are constantly changing.
Failure to constantly research into better ways to move your business ahead will make you stagnant. If your competitor has found a more refined and easier way to do what you do, don’t be surprised when your business begins to sink.
Alright, now that you know some of the reasons why businesses fail, it’s time to move on to what most entrepreneurs do after failure?
What should Entrepreneurs do after their Businesses Fail
Yes, you have failed. But it’s not the end of the world.
Let’s take a cue from what successful entrepreneurs did each time they failed before becoming successful.
Here are five of them:
- Take a break
Entrepreneurship can take a toll on your mental health, especially if you failed at achieving your dream.
A survey reveals that entrepreneurs work harder than employees.
And so, even after you had high hopes and gave the business your all, it just didn’t meet up with your expectation.After closing shop, many entrepreneurs destress by taking a break from work. The ones that can afford it go on a vacation.
This break helps you to clear your head (and even cry if you need to).
While you may be tempted to delve into evaluating what went wrong, it’s best to allow some healing first.If you cannot afford a vacation, try your hands on other things that will distract you like a hobby.
- Evaluate what went wrong
After you have had some time to destress, it’s essential to determine what went wrong with your startup business that failed.
Closing down a business and quickly jumping into another will most likely lead to another failure.
Successful entrepreneurs learn from their mistakes before moving on.If you can identify what led to the business collapsing, you will be more careful not to repeat it in your next venture.
- Come up with an alternative source of income
Businesses fail primarily because of their inability to generate income. Once entrepreneurs decide to pack up, they know that the business can no longer support them financially.This is why they consistently devise a way to generate income outside the business. For you, it might mean taking up a paid employment again.
The good thing about this is that while you are working for someone else, it gives you time to reflect on whether you want to continue on the path of entrepreneurship.As long as the conviction is still strong, you won’t deviate from pursuing your dream.
Plus, you also get to pick up one or two lessons on better handling finances and spending when you start up again.
- Get in touch with other entrepreneurs
True entrepreneurs do not give up. Each time they fall, they always dust it off and try again.
They also do one thing – link up with other entrepreneurs to share their experiences and learn from their mistakes.Many of them use the opportunity to link up on social media, attend conferences and build a network of connections.
The result is that they tend to gain new perspectives as well as build more contact lists.
And if ever you need to talk to someone and get some support, your best bet is your fellow entrepreneur who has been there.
Such a person understands where you are coming from and can offer some sympathy that you may need without even realizing it.
Staying in touch with other entrepreneurs can also open up new opportunities or some partnership for your business.
- Come up with a business plan
The next step most entrepreneurs take is to come up with a viable business plan. One that is well detailed and makes room for contingencies.This business plan considers what went wrong with the prior business and how to avoid repeating it.
This is not the time to gamble with a business idea. You may need the services of a business consultant to give it your best shot this time around.
True entrepreneurs are people that have failed several times before getting it right. Your business could be the next big thing if you keep the dream alive.
Thomas Edison failed 10,000 times in his quest to creating an incandescent light bulb. But he never saw it as a failure, instead 10,000 ways that won’t work.
If you ever feel discouraged, remember that these 11 very successful entrepreneurs were once rejected before luck finally smiled on them(source: myneurogym.com). Viewing your failure as nothing but a stepping stool to your greatness will better position you for success in your new venture.
Entrepreneurs are more likely to value success after they have gone through several failures.
If ever you need a word of encouragement, just know that many entrepreneurs have a humbling story behind their success. And if they could make it, you sure can!