In the past decade or so India has seen a burgeoning rate of start-ups but most of them witnessed a chain of shutdowns and layoffs at an exponential rate. According to government figures, more than 80 percent of new businesses have tanked within the first three years of being established. Despite the fact that most of the companies are started by experience-rich individuals but they are not able to hold the ground firmly in long run.
There are many reasons why the startups fail and few include internal problems that lead to permanent closure despite being well-funded and remarkable business models. Few main reasons for start-up failures as given by industry experts are:
Lack of innovation
Despite the market valuation of Indian startups growing immensely, they are not able to move beyond first five years because of lack of novelty and unique business models. It is a widely known fact that Indian start-ups imitate global trends and just about fine-tune the ideas and models to suit the local needs. For example to every Amazon there is a Flipkart and to every AirBnB there are OYO Rooms. However, not all replicas work at big levels so become failures in logistics and e-commerce mainly.
Lack of a good business plan
When most of the start-ups are in formation stage, entrepreneurs write up great business plans but that is only to raise funds. Most of the time the reach and market of the business are not analyzed properly and target customers are not known. This, most of the time, leads to one bad decision after another, and hence shutting down of the start-up.
Most of the time, even when the start-up is well researched and funded, there are hinges that may be small as a wrong time to enter the market. There have been many businesses that were way ahead of their times while some were a little late to enter.
Too much competition
Many a times, start-ups fail to withstand fierce competition in the market. Today with an open economy and easily available funds, it is easier to build a start-up but very difficult to sustain as there would be many others with the same business plan. But only those with resilience and innovation can stand the kind of rivalry. Many startups have gone way ahead in the market creating a huge barrier for the new players that find it difficult to carry on.
Some really well-funded technology start-ups have been named among the top recruiters in the last few years. They have managed hiring in numbers offering humongous salary packages and even poached experienced workers from top companies. According to many reports, both Flipkart and Snapdeal hired ex-Silicon Valley executives for premiums between one to five crores per annum. And despite continued employment as such huge levels the returns to many startups have not been up to the mark. Experts feel that these unreasonable salaries are most of the time a reason their business shatters quickly.
Incorrect business patterns
Despite being well-researched and funded, many start-ups could not maintain for a longer period owing to lack of balance between business and technology. Some give too much focus to technology that upsets the logistics and hence things go haywire soon.
Inability to respond to market dynamics
Studying the market dynamics in the current scenario is very important. And many startups, most of the times are not able to respond to changing trends wisely. The teams do not rehash or alter their business plans according to the trends and forget that they need to be flexible in order to survive the fierce competition.
To make start-ups work in India feasibly, there is definitely a need to add much more than just money. Since there is no dearth of investors and investment, there are few other important points one can ponder upon in a bid to plan for a long term success of their business.
Make a detailed business plan
It is very important for entrepreneurs are write a detailed business plan that involves setting achievable targets. A business plan helps in understanding and processing the business. It also assists in scanning the environment they are operating on since the competition today is enormous and totally unmatched.
Learn to risk money
When a startup is formulated and executed, it takes time to settle. One should not expect immediate returns and many a times there can be more failures than successes. Losses have to be estimated in advance and a plan B should always be there if need be.
Know your target customers
An entrepreneur should understand that they are in the market to serve their target customers and hence every decision should be taken in mind keeping how the customers would feel about the product. A detailed study of the market should be conducted knowing the customer mood and requirements before launching the product. A detailed research is the key to long term success.
Adapt according to the market
For a business to survive and be successful, it is very important to adapt to market trends. Despite the fact that one may even get wrong even after thorough research and planning, it is important to be flexible and react to surprises quickly and effectively.
Put together a like-minded team
Always remember a great team can always help achieve your ultimate goal. Even though the entrepreneur may be the driving force behind the success of their start-up, they cannot achieve it without a proper help from a like-minded team effort, those who understand the vision and work accordingly.
Finally, it is also very important to be patient as the road to long-term success can be long and challenging. It is always very tempting to take on the first offer that comes one’s way but it has to be right for the company.