There is a generally accepted notion that the majority of startups rarely exist beyond 5 years and this should be a worrying revelation for startups. This seems to suggest that there is something peculiar about start-up entrepreneurs which makes their failure quite obvious within a measurable timeframe. In this article, I attempt to have a look at 5 of the top reasons why startup entrepreneurs fail to go beyond the 5-year mark. As a startup, you should do some reflection to see if you are guilty of any of the reasons listed below.
Poor Support From Government Infrastructures
There is no doubt that the government should play an enabling role for its respective startup entrepreneurs. More so, positive government action is needed for Zimbabwe where the economy is largely in the hands of the informal sector which comprises of startup entrepreneurs. Such government support should be directed to such entrepreneurs as those in for example in Magaba and/or Glen View Area 8. One thing we will all agree on is that entrepreneurs in these areas have been operating, arguably since independence but little to no development has trickled down to them. In the wake of Covid19, one would have assumed that government relief aid should have been channelled to such businesses to allow for them to invest in adapting to the changing times but this has not been the case. While we appreciate that there is a need for investments in such factors as safety and business development, government support was there to call for formalised businesses to apply for relief aid. However, with our government, you can`t tell if this was deliberate or it was a genuine lack of oversight to the important role played by the respective businesses.
Poor Market Analysis By StartUps
There is a sense in which most start-up entrepreneurs introduce their product without having had proper market analysis. To this effect, they end up introducing products/services not properly aligned with the market needs and demands. Arguably, this symbolises more of a top-down approach where what is required is more of a bottom-up type of an approach. Adopting a bottom-up approach entails engaging your preferred market to attune your product/service to the needs of the market. From such an approach you should be able to take note of some of the things your market wants to see in your product/service. Better still, you can even arrive at an estimated selling price, one which will surely be appealing to your market.
More Passion Than Business Sense
I have had a realisation that most startup entrepreneurs are passionate about their business idea, good or service. It would seem that this passion clouds their ability to reason and make business-wise decisions which should see their venture being viable beyond the 5-year mark. The thing with being passionate and overly possessed with ideas is that you risk getting into the inventor`s dilemma trap. In this trap, you are always patting yourself on the back for finally putting an idea into action or a product into the market. While such strides should indeed be applauded, as a startup entrepreneur you only need a handful of congratulatory messages. Instead, what you should be on the lookout for is customer feedback and ways in which you can improve your business idea, product or service.
Because startups are overly enthused with their business idea, they fail to appreciate the observance of proper business ethics which arguably are a major determinant in whether a business would succeed or fail. Such ethics revolve around proper pricing, customer service and a general standardised way of doing business. In some instances, an entrepreneur wants to make money as quickly as possible and thinks the best way to do this is by putting a high tag for a basic product. And they say I am targeting high-end customers. Can you imagine? In this regard, I am always reminded of the saying that money will not grow if you force it to conceive unreasonable returns. The same goes for customer care and standardises business procedures.
As with every market worthy to venture in, competition is always stiff and one would assume that most startups do appreciate this. You also want to appreciate that in the Zimbabwean business environment, copycatting has since become the norm perhaps as fruits our beloved indigenisation policy. To this effect, everyone is thinking of a business to do and looking at what others are doing and copy from that. I wonder if it is due to the lack of proper market research or its pure laziness on our part. Whichever way, in Zimbabwe, you should rest assured that once you put your business out into the market and it seems to attract a sizeable market share, 2 or more individuals will be adopting your idea virtually daily. By the fall of your first 5 years in business, you will have more people selling a similar product and unsustainably sharing the market.
Effects of globalisation
Further to localised competition comes the impact of globalisation and the increased interdependencies between countries. To some degree, these were some of the impacts government attempted to curb through its SI64 policy. I don`t know if start-up entrepreneurs are appreciating the precarious situation that businesses in Africa, specifically Zimbabwe find themselves in the wake of globalisation. This I am saying regarding entrepreneurs in the clothing, manufacturing and ICT. Take for example the fate of tailor in Zimbabwe with at best 5 sewing machines having to indirectly compete with an exporting factory in China. A factory in china enjoys far-reaching government support both there in China and here in Zimbabwe too and this adds to the economies of scale advantage enjoyed by well-established factories. What then do you think to be the fate of the local tailor given such conditions?