The growth phase of a startup often leaves most entrepreneurs confused and frustrated. The metrics and KPIs, which are supposed to help you figure out how you are performing, tell you that things are going fine but they do not give a detailed view.
Companies fail all the time. Sometimes they fail because they don’t have the right team, sometimes they fail because they make bad decisions, sometimes they fail because of a hostile environment and sometimes it’s because they’re growing too fast. But one thing that I’ve observed is startups fail due to what I call the “growth spurt” .
If you look closely, there is another common thread running through almost all startups in the market right now: one that never grows as much as it is supposed to grow or even fails completely. So what causes startups to fail after their growth spurt? And why does this happen? Is there anything that can be done about it?
Setting Goals Too High:
Most entrepreneurs believe that setting high goals will help them reach the top of their industry or become billionaires overnight. But setting too high goals can lead to failure because it is difficult to meet such targets within a short span of time.
In order for startups to grow fast, they need to focus on creating value for customers rather than making money from them as soon as possible. They should also focus on building strong relationships with customers so that they can continue providing them with valuable services in future too.
Scaling up too fast
Growth is good — but it’s not inevitable. You need to consider whether or not your business is ready to scale up and if you have the right team in place to do so successfully. If you don’t have all the pieces in place, it may be better for your company not to scale at all; instead, focus on building out your product and getting feedback from users before considering expansion into new markets or verticals.
Lack of focus and alignment
Startups are always under pressure to grow quickly. This can cause companies to make decisions that aren’t in the best interest of their business. For example, hiring too many people too quickly can lead to a lack of focus and misallocation of resources, as well as a chaotic environment that is difficult for employees to thrive in.
When a startup is small, it’s easy for everyone involved to have their own ideas about what needs to be done next. As it grows and expands, however, everyone needs to be on the same page about what needs to happen next in order for the company to continue growing. If there isn’t clear direction or leadership from above, then things can quickly fall apart because no one knows where they fit into the bigger picture anymore.
Hiring prematurely
The first phase of growth for most startups involves hiring new employees, which is an important part of scaling up successfully (especially if you’re taking on more responsibilities). However, during this transition period, it’s easy for managers and founders to get carried away with hiring new talent — especially if they haven’t hired enough people yet!
Not setting long-term goals
One of the biggest mistakes many startups make is not setting long-term goals. Not only do they have trouble figuring out what they should be focusing on, but they also don’t have any idea how successful they will be in the future. The result? They get distracted by the daily grind and never really get anything done — or worse, don’t even bother to start.
Capital Efficiency “Rule”
Another common reason why startups fail is due to being capital inefficient (i.e., spending more money than they make). This happens because founders often don’t consider all costs when building their business model, such as payback periods for equipment purchases or the cost of running a warehouse or logistics operations from their location.
Saying yes to every customer request (“over-customizing”).
Another mistake is taking on too many projects at once, as well as letting customers dictate what you do next. Sure, you may have been busy when you launched your company, but now that things are slowing down, you need to figure out if there will ever be another opportunity like this again and make sure you aren’t wasting time chasing it down. You can’t just say yes to everything!
Focusing on marketing too little or too late
Companies that focus too much on marketing end up falling into the trap of “marketing my product” instead of “building a great product.” Marketing can make your product more popular, but it cannot fix any problems with it. If you have a great product, people will come to you for it. You don’t need to go out looking for them.
Entrepreneurs looking to establish successful businesses can gain valuable insights and resources by reading Incfile Reviews which provide useful information on incorporating their companies and getting them off to a strong start.