At preliminary stage of startups, entrepreneurs get so much excited of their either new business model or improved concept of some existing business model, that the hypothesis of 100% success inhabits their concentration. The success of any of the business model is directly dependent on the acceptability of the innovative concept in the market. Hence the acceptability limits are critical to judge before investing time and money into a business model.
FS Labs comprehended the major factors of startup failure and found that most of the newbie startups struggle with the proper validation of their startup concept at initial stage. “What if my idea gets stolen”, “What if people would laugh at first” are some of the initial phase symptoms that prevent founders to get the exact validity/acceptability of their startup idea. What if you work on an idea that has low chances of being accepted in the market or doesn’t have potential to stand against competitors?
Here are major reasons of startup failure due to deficiency of viable business model-
Product Failure – A product or service has more chances of acceptance in the market if it solves some genuine problem and is within affordability limits of the targeted market volume. Success possibility is enhanced by targeting the large mass. Most of the startups fail because of their product failure.
- Why would people love a concept that doesn’t add value to them?
- Why would people get shifted to some concept that is quite similar to existing trust worthy business model?
- Why would people pay money for some product which is not within affordability limits or if economical solutions already exist?
One possible way to avoid such scenarios is by making a prototype of your concept and has a proper feedback by the targeted mass. Based on the feedback on prototype, one can easily decide what changes need to be made in the existing concept. The chances of someone stealing your idea are quite lower than the chances of its improvement by discussing the idea with other people of same industry or the direct user.
Competition Failure – Good Entrepreneurship skills include the ability to judge the level of competition in the market and decide the business strategies to attract the consumers towards the new product to overcome the level of competition.
“New acceptable concept has the inherent quality of attracting other players who are working in same domain. Hence the expected level of challenge should be identified by the strength of potential competitors. Existing improved concepts has the probability of appealing the competitors to alter their business model to stop the penetration by those particular features. So the strength of competitor decides the chance of success.”
One major reason of startup failure is the lack of judging the level of competition that is being faced by the new business model.
- Why would competitor allow you to penetrate their market volume?
- Why would other players of same domain not change their business model to capture your market base?
- Why would other players not stand against you in future
One possible way to overcome such scenarios is by properly estimating the market volume and deciding the market penetration tactics by comparative analysis of new vs existing models.
Infiltration Failure – A successful startup business model has the ability to infiltrate the market base of other established players quite easily by its features. Combination of all the existing features available with the major players and the new unique features has the higher chances of success.
“New features have the ability to attract customers but the existing features make consumer reluctant towards new model. Hence startups should try to capture all the major features of existing players and enhance them with the presence of new features to ensure the sufficient penetration rate.”
Infiltration rate is also a major concern for new startups:-
- Why would people get shifted towards one new feature if it doesn’t cover all the existing ones?
- Why would people leave the existing model for completely new model?
One possible way to avoid such scenario is either by providing the enhanced features along with existing setup or by completely different but appealing model.
Scalability Failure – Business model should be designed in such a manner that it could be easily scalable either by enlarging the targeted market volume or by introducing new verticals once it reaches to funding stage.
Startups with less scope of scalability have more chances of failure. Hence the business model should be designed to keep the scope of scalability in it.
This was a small analysis by FS Labs on Startup Business Model Failure and the potential way to avoid them. Stay connected for more updates.