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08 Reasons Startups Fail

Head of SSLCOMMERZ Nawat Ashekin explains how a host of common mistakes often cause premature death of early-stage companies. Mr. Nawat has a long story of starting companies and of failure, he draws lessons from his own experience of making too many common and avoidable mistakes.

Enter Nawat Ashekin:

Often, startups fail because we tend to think that product is more important than sales. For my very first venture, I was obsessed with product and operations. I didn’t pay much attention to sales. This is the case for most early-stage businesses. Founders tend to de-prioritize sales. This is number one.

The other startup killer is fear. It is fear in the guise of reputation and brand value and all those fancy things that stop us from doing important works.

M Nawat Ashekin
M Nawat Ashekin

We are scared of two things. Firstly, we think we are someone big and already have a big brand. Hence, we fear that if my product fails to deliver and if I can’t create the delight, then I would be in trouble. We tend to overthink which is not helpful. This fear dictates our action. Instead of making decisions, we abstain from taking action. I don’t pitch. I don’t commit because of the fear of judgment that I might fail to deliver. This leads to not trying to sell and overcome the deficiencies and eventual failure.

Secondly, the fear of self-worth plays a part. We tend to mix up our self-worth with the worth of the startup that we are trying to build. This makes us risk-averse. We become overly cautious while making decisions. Which means we hesitate to take actions.

Thirdly, wrong pricing strategy. Startups tend to price conservatively. When there is some big competition, they further reduce their price. The thinking behind this strategy is simple. You think people are price sensitive. Hence, if you can provide a competitive price they would buy from you. And if you can scale enough, you will be making a hell lot of money. Not at all.

When you start reducing your price, your margin becomes razor thin. Add to that, your resources are limited and scaling is not easy. We tend to think that I would make a profit through volumes, but that’s not how you make money. You’re a small company, you have to make higher margins out of your small operations. When I can’t sell enough. On top of that, I make lower margins, eventually, I run out of money which means death.

The lack of financial knowledge leads to failure as well. Many founders tend to start with huge fixed cost. They build up fixed costs from the beginning. We build customer service process, better delivery, the delegation of work etc. The moment we increase our fixed cost, the reserve dries out sooner or later.

When you are starting a company you can’t delegate anything. You have to do everything yourselves. You should not hire an employee until you have exhausted your own energy. If you do the opposite you run the risk of failing.

Finally and most importantly, focus. Early stage entrepreneurs easily get distracted. People try to do too many things at once. They explore unnecessary product verticals foregoing specialization and trying almost everything to maximize profits. This is suicidal and eventually kill a startup.

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