According to a report by Startup Genome, 90% of startups completely fail, while only 1.5% of startups get a successful exit of $50 million. And the most common reasons that we see popping up every time are bad hiring or bad marketing.
But even after witnessing so many founders fail because of these issues, why do we keep repeating the same mistakes and hope for a different outcome?
The answer is, it's not that easy. What others see from outside, is much more complex in reality. And making a decision becomes harder than ever.
Let's dig deeper into the problems that Startups face in their growth stage and find out how they can avoid it to reach the $1 Million mark sooner and stronger.
Problems that leads to a startup failure
Running a startup is a hard nut to crack. There are countless moving parts involved to make it a success. And when it doesn't work out, people blame the founder. But that is just a way for VCs to simplify the issue at hand by playing the blame game.
If a movie flops, would you say that it was just the director who was at fault? You wouldn't do that, because you know there are many other factors involved in this. From the story writer to the director, to the actors and the producers. It involves a lot of people. And in the case of startups, the stakes are much higher.
We found out problems that mostly occurred in a certain scenario and led to the failure of even the most promising Startups. We also noticed that if you look closely, each problem could be traced back to one principal reason, which is Bad Hiring.
Today we'll be discussing these and we'll show you how you can fix the loopholes and stay afloat even in the worst market conditions.
Reason 1: Difficulty in searching for a scalable marketing channel
For a business to grow, a scalable marketing channel is essential — and that’s one area startups often struggle with.
For example, Alex Kataev, CTO and founder of Eightify detailed his company’s difficulty in finding a scalable marketing channel. Hoping for quick success, they made the mistake of “testing out random hypotheses.” Such as a referral program, an affiliate program, Reddit comments, etc.
However, as their actions were mostly based on assumptions, it took the company a long time and significant effort to figure out their ideal marketing channel such as influencer marketing.
Reason 2: Lack of Iteration based on failures
Startups often lack the required data and market experience to run fail proof campaigns. As a result, random hypotheses are thrown into marketing, which leads to unsatisfactory results. Many good ideas get lost in the chaotic process as well.
Moreover, these fledgling businesses often don’t have the system to record the results of the failed efforts. This lack of conclusive insights prevents the team from learning from their mistakes, which makes strategic adjustments a forgotten element in their business operation.
Another issue here is the absence of a centralized knowledge base for the team. The new team members often don’t have enough information about the failed experiments and end up testing the same things over and over again. This drains a startup’s already limited resources without showing any improvements or enhanced strategic iteration.
Reason 3: Lack of alignment between marketing, and sales team
And of course, the eternal battle between marketing & sales teams causes several issues for startups. Salespeople blame marketers for bringing bad leads, prompting marketers to blame it on the sales team’s skill to sell. Startups also find it difficult to keep the sales and marketing team on the same page.
Want to avoid this constant bickering? Here are a few tricks that helped us at Teamlex:
- Shared KPIs: We ensure that every team works for one shared goal — revenue. Our marketing is responsible for following the revenue plan just as much as the sales team. Failure to meet the plan affects the bonus and performance review of both departments. This ensures individual motivation and gives both teams a unified direction.
- Lead scoring:
Besides the basic data collection form, we also collect customer information like purchasing ability, intent to buy, and urgency of purchase. Then we categorize leads into A/B/C/D segments based on our findings. Any drop in the segments indicates issues at the marketing level. A drop in conversions, while lead volume is stable, indicates that the problem is in sales. This ensures individual accountability and prevents inter-departmental blame games.
- Balance in lead generation:
Marketers often believe that the more leads they bring in, the better. On the contrary, this often overwhelms the sales team and results in a decrease in client processing time and compromised conversion and ROMI. To prevent this from happening, we implemented a process whereby the sales department regularly sends information on how many leads they can tackle every day.
Reason 4: Unidentified target market
There are an endless number of market problems that a Startup faces in the initial phase. For instance:
Oftentimes companies fail to identify the right market for their product. They choose the wrong audience who do not need their product and end up spending most of their budget to try and acquire customers which does not work out in their favour.
Startups are reluctant to niche down because they're afraid of going too narrow and losing opportunities in other markets. They end up targeting a very broad sector which affects their product positioning and does not get the desired results or resonance.
Notionlytics made this mistake by targeting the whole base of Notion users while their ideal customers were those who used Notion extensively, such as educators, content creators, and authors.
Sometimes, the niche market that a startup chooses to target, checks all the boxes but does not have the buying capacity. It takes a very long time to figure this out, draining a lot of resources and time in the meantime.
Reason 5: Wrong product-market fit
The product landscape involves many moving parts beyond the conventional product-market fit. There are other dimensions like:
Market-Product Fit
Product-Channel Fit
Channel-Model Fit
Model-Market Fit
For instance, for one of our clients in the initial phase, we used to run paid ads. And our sales inquiries, conversion rates, everything was above the industry standards. The team thought we've found our perfect product-market fit.
So to tap into it, we created an even better and stronger, "converter" funnel which qualified leads intent through a webinar.
However, the day we decided to pause & pivot our ad strategy, our sales went downhill abruptly. This made us realize that there's more to it than one can comprehend.
Whenever there's a misalignment, you need to create a comprehensive testing strategy to iterate on your offerings, messaging, and target demographics. Remember, the more you test, the more you learn about your audience.
A misalignment in product-market fit calls for a multi-faceted approach. Testing, strategic hiring, and data-informed marketing strategies collectively serve as the compass to navigate towards a more aligned fit.
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Reason 6: Lack of proper strategy
Marketing is the lifeline of running a business. It's not just about creating a few content pieces or running an ad. From branding to acquiring new customers and retaining them, marketing plays a big role in every aspect of your business. Considering, you have a proper strategy charted out which helps you align your efforts with your business goals.
Many startups do not even think about it, and as a result, their marketing efforts don't lead to any quantifiable results. So you end up burning your money trying to market your product but with no definite goal in mind. And without that, you're bound to get lost.
To avoid that, you should be taking a calculated and strategic step to minimize the risk factor. Here’s how you can do that -
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Reason 7: Bad Hiring
Every single problem burns down to one root cause, the team working behind it. Lack of market research, lack of customer understanding, lack of a strategy, everything can be solved if you have a solid set of experts who know how to solve it.
Many times, new founders make the mistake of hiring as per the mindset, which is important for a startup. But it is also important to hire as per the expertise and the knowledge they bring to the table.
As a startup, you're already tight on budget, and wasting money to hire just for how motivated your team members are, won't get you anywhere. So, below is the process we at Teamlex use for hiring, and so should you.
What should you do to step up your Marketing game as a Startup?
There are probably 1001 solutions to solve a particular problem, but is that solution viable for you? Will that work for your specific situation?
Depends on a lot of factors - your team's bandwidth, your business goals, your market, your budget, and the expertise accessible to you. Except for the budget, every other problem can be solved if you've access to the right people who can help you run experiments and narrow down what works for you.
Skills can be taught, but not experience. And that is what you need the most at this stage. But expertise comes at a cost. Often, that's higher than what a startup could afford.
So why not switch to hiring teams on a project basis? No full-time commitments, no lengthy paperwork, or delayed projects. Instead, you save thousands of dollars, and a lot of time, and get a dedicated team of experts as per the need of a project.
It can decrease your monetary spends and consequently decrease the risks involved. You can test more waters and find out what works for you, without a big team or a large payroll.
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