3 Leading Causes Why Most Startups Fail

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Having worked with all types of startups the past several years – yeah even before the word “startup” became the cool thing – I have come to identify three causes that lead to most startup failures.

Of course, as you can imagine, I am not talking about startups that fail either due to a bad idea, product or service to start with or due to lack of funding or finding the right kind of co-founders.

In this post, I discuss 3 causes that may be overlooked by most people and perhaps not even recognized by some.

As a serial entrepreneur myself and having launched 3 successful startups, I can understand why founders may have a difficult time identifying these causes and proactively attacking them.

They are super busy with turning their business idea into a reality. They are busy seeking funding and partners. They are super busy developing and taking the product or service off the ground. They are busy with a million things.

But here’s is the thing:

These three causes are not usually considered as traditional threats to a startup and hence do not show up on the radar. The reason could be the very fact that they are so simple and fundamental.

Furthermore, most founders think they have got these all nailed down.

lack of brand mission is killing startups

Leading Cause #1: Lack of a Brand Vision

I see a lot of startups having awesome product or service ideas. They seek to provide solutions to problems that people face in their daily lives. They seek to add value to and enrich the lives of people – in most cases. However, the initial spark that led to the idea quickly turns into a management and logistic plateau. Founders are bogged down with the details of realizing their ideas that they forget to strengthen their vision and keep it forefront.

“Many start-ups are created, evaluated, managed and, seemingly, scaled, without much brand literacy and a robustly short-term view on marketing. says Lawrence Weber over at Campaign magazine. (Source)

During my strategy sessions with startup clients, when I ask them about their vision, most often the response I get is either a bland and generic phrase one end of the spectrum or an out of this world and ridiculous vision statement using a ton of superfluous words which mean nothing.

The lack of a proper brand vision is one of the leading causes of startups failing.

A brand vision is derived from the initial spark that prompted you to embark on the startup journey, your core brand values and your unique value proposition.

It is not about big words about changing the world.

It is about connecting the dots of why you think your startup will add value to this world.

Think hard about this.

Of course, if after much reflection you feel that your startup is really not going to add much value to the world and the sole purpose of its existence is to make some money, then read no further. This article is not for you.

Your brand vision could also be your mission statement.

To build the right mission statement for your startup, focus on getting these 4 steps right:

Step 1: Reflect

Reflect on what makes your company different from other companies. Even if your business is an exact replica of one out there, there will still be a myriad of differences between your brand and the other.

It is very difficult to decide on what the difference may be. Unless of course there are some really glaring differences right in your face.

So, why is it difficult?

Most often this is because the primary objective of most startup founders is money. There is nothing wrong with that. But making money the primary objective does not offer you with any insights into how you are different from other brands.

And remember – I am not referring to feature or product offering differences. I am talking about brand differences. Differences that make you unique and brand recall worthy.

Step 2: Keep it simple.

One paragraph is sufficient; if you can’t say your mission in a few sentences, you need to hone it more and focus on the few aspects that are the most relevant to you.

Being able to distill your mission into a simple paragraph will allow you to think deep into what your real mission is. Often, startup founders realize that what they thought of as their brand mission is, in fact, something else.

I think you will agree with me when I say:

Genuine ideas are always simple.

Don’t get me wrong – I am not saying that complex ideas or concepts are not genuine. But what I am trying to say is that when it comes to brand vision or mission statements, the simpler your idea, the more authentic and true to your core you will be.

Step 3: Focus on the timeless.

Account for change in your products and customers.

It would be a grave mistake to create a mission statement for your brand that is directly tied to your immediate products, services or customer segment.

Yes, there are brands out there where the mission statement is tightly coupled with their product or service. Here is an example:

Google’s mission statement:

“Our mission is to organize the world’s information and make it universally accessible and useful.” (Source)

If your brand is product or service focused, then it is ok to have a mission statement thus. However, my recommendation is to always have a bigger agenda than just your product or service – unless you are as focused or big as Google or FexEx etc.

Step 4: Ask for feedback.

Ask friends and family whether they think your mission statement is clear and concise.

Keep it open-ended. Do not give them too much context or explanation about your vision or your interpretation and see what they think.

If a majority of the people you ask express lack of clarity or confusion then it is time to go back to the drawing board and hone the statement even further.

Language is very important in marketing and your mission statement is a marketing tool – as well as a guiding internal beacon. So, the language you use in it should be crystal clear.

“A lack of clarity in articulating why their organization exists. Once clarity has been gained on why an organization exists, the next essential step is in doing the hard work of concisely articulating it.  This needs to be done in a way that can be easily understood by internal and external stakeholders so they can get on board in helping to facilitate the purpose, vision, and mission.”, says Claire Madden of HelloClarity. (Source)

So even if you have clarity in terms of your vision, articulating it and communicating it is crucial.

Step #5: Display it prominently.

Your mission statement should fit your brand, so make it as visible as any other brand element.

This is not just for the world and your customers to see but also to motivate and invigorate your team members.

To remember what the company stands for. To ensure the team knows why they are working for your company. To always keep your mission as a priority.

Here are 102 creative ways of displaying your vision and mission statements.

Read more in this article on brands with a mission.

Leading Cause #2: Lack of a Brand Strategy

Every successful business needs to understand and implement a robust brand strategy. Thinking about how your brand should behave in relation to your target market is the essence of a brand strategy.

Your brand strategy defines how much you would convince investors, the public and your potential customers about why they should be interested in your startup and become paying customers.

Once again, most startups do not grasp the idea of a how important a cohesive strategy that involves the major touch points of your brand come together to ensure present and future success of your startup.

Here’s the deal:

Get this wrong and it will be an uphill battle trying to convince the world that your startups deserve to be alive and kicking.

The most important components of a brand strategy are:

Competitive positioning

Competitive positioning includes looking into the market profile, customer segments, and value proposition.

If you do not actively work towards positioning your brand in the minds of your customers, then your competitors will do the positioning for you.

You should start off by looking deep and hard into your market segment profile.

What stage is the market in?

If it is in a growth phase then your positioning should be focused on establishing your brand as an authority and a pioneer.

If the market is a mature phase, then you should focus on positioning based on better features, better customer service, better offers and so on.

If the market is in a declining stage then you would be forced to focus on pricing and desperate grabbing of the market share.

Your brand promise

Your brand promise is the promise you make to your target market about the experience they will have with your startup and the product or service you offer.

“As marketers we take brand promises for granted. We just accept that every brand in its right mind has one and that it is committed to keeping it. As consumers, we have no such awareness. We don’t wander around with the strategies of our favorite brands on our devices checking that, wherever we see them, they are doing what they said they would do in the strategy.” says Mark Di Somma on the awesome Brand Strategy Insider blog. (Source)

Customers take brand promises seriously. Perhaps you have a brand promise on your website that most of your customers hardly ever see. But they do recognize your brand promise from your messaging.

If you do not keep your promise, your brand will be in trouble!

Your pricing strategy

Your pricing strategy dictates how your brand is perceived – this factor is most often ignored by startup founders and only comes to the table at the end of the startup process by which time it may be too late to get it right.

Your pricing strategy should reflect the following:

  • Reflect the value you provide versus your competitors – keep an eye on the competition but also work out your pricing strategy rationally
  • Considers what the market will truly pay for your offering – be realistic and always work with the market – unless you are in the uber-luxury segment.
  • Enables you to reach your revenue and market share goals – make sure that your pricing will enable you to maximize your revenues while still gaining significant market share
  • Maximizes your profits – if you are not making a profit then your brand is doomed to fail!

Your messaging strategy

Your messaging strategy takes what’s important to your market and communicates it effectively and consistently.

Your brand messaging strategy must align with your positioning and brand strategy and give a consistent tone of voice to your brand.

  • Start off by evaluating your current messaging. Check both external and internal messages and analyze them.
  • Review your competitors messaging strategies to pick golden nuggets – if there are any. I am not advocating copying your competition verbatim. I am suggesting that you understand what their strategy is and then see if you can get inspiration from them to craft your own custom strategy.
  • Determine the tone of your messaging and make sure it aligns with the overall positioning and brand strategies.
  • Crystalize your value proposition and then create an elevator pitch
  • Evaluate your target audience and create your positioning statement

To create a robust brand strategy, you would need to focus on the following factors:

  1. A brand audit to determine the market’s perception of your brand
  2. Getting the brand basics right which includes determining the brand type and then cementing the value proposition by identifying a brand theme
  3. Creating a brand architecture by discovering your brand’s emotional benefits which then become your brand pillars and brand means
  4. Creating your brand experience which includes exploring your brand’s personality traits and tying them to your brand promise

Read more in this article about brand strategy.

Leading Cause #3: Lack of Storytelling

Every brand has a story to tell. Some are inspirational while others are tragic. In so many ways, building a brand is like telling a great story.

At the heart of both crafts is the power to evoke emotions from the audience. Great storytellers can make you cry while branding experts can make you buy.

Most startup founders think that getting a logo design created is all it takes to communicate your story visually.

Therein lies the problem.

Great storytelling relies on creating a brand story and telling that story through a consistent visual identity.

Creating a brand story relies on identifying and understanding your core values and your brand’s unique proposition and then forming a story that connects these to your target audience.

Just talking about the awesome features of your product or service is not storytelling. Just saying how great your product or service is, does not cut it. You need to connect emotionally with your audience.

Most startups really do not tell the right story. Most often than not they focus on the wrong things to talk about. Their story usually revolves around the features and the metrics of their service or product. They assume that the world understands these things right off the bat and will embrace them.

Nothing could be further than the truth.

Watch this video on telling a brand story.