As we saw in Chapter 1, a large proportion of the world's entrepreneurial projects – and especially of potential high-growth start-ups – go out of business quickly. This problem has obviously been analyzed a lot and these studies show that there are five dominating reasons for the failures. In this chapter, we will walk through these and address how you deal with them.
In the first chapter of this book, we referred to some horrible statistics concerning how often start-ups (especially growth start-ups) fail. However, mitigating circumstances were applicable. First, we showed that there are a lot of entrepreneurial roles such as skunk works, intrapreneur, franchisee and so on which are less risky than the traditional way, where you create a new company based on an innovative idea. Second, we mentioned that a lot of entrepreneurs go through many mistakes and at times spectacular failures before they hopefully succeed. If a statistic shows that 75% of companies fail, it does not necessarily mean that 75% of entrepreneurs never achieve great success. However, the bottom line remains that a lot of entrepreneurs do fail. Research shows that the five main reasons are:
- poor product/market fit
- internal disputes
- premature scaling
- unbalanced scaling
- misguided transition from early adopters to mainstream.
So let's now see why that happens and how it can be prevented.
If a statistic shows that 75% of companies fail, it does not necessarily mean that ...