Going back to the board, analysing mistakes and efficiently addressing them can help entrepreneurs establish successful start-ups in the long run, advises Vikram Bhandari, the chief technology and innovation officer at Riveron, a business advisory firm.
Statistically, about 90 per cent of all start-ups fail to survive in the first few years of their operation and are forced to shut down.
Nearly 10 per cent of start-ups fail in the first year, while a staggering 70 per cent fail within five years.
While there are numerous reasons that lead to such failure, there are insights available to entrepreneurs on what should be done after they are forced to abandon their aspirations.
The road does not end with the shutdown of their businesses.
Start-ups are often defined by their workforces, whose dedication and innovation lead to eventual success. However, failure remains a part of the journey. This begs the question -- what should be done by an entrepreneur upon the failure of their first start-up?
Here is some advice that can help.
1. Measure the critical factors
When entrepreneurs fail to sustain their first start-up, the first thing they must to do is to go back to the drawing board.
They need to analyse every minute detail that led to the breakdown. Based on the findings of the analysis, entrepreneurs need to tweak their approach and address critical issues.
For example, a multinational American company offering homestay services almost failed before it was relaunched by its founder following meticulous analysis of certain critical factors. Presently, the company operates in over 190 countries around the world.
Additionally, entrepreneurs also need to prioritise their mental well-being at this point.
Sustaining a resilient mindset during trying times like these shapes entrepreneurs for the long run, enabling them to make sound decisions that lead them to establish potential unicorns.
2. Survey market demand
One of the primary contributing factors behind the premature shutdown of first-time start-ups is a limited understanding of market sentiments and demands.
Founders need to gather valuable data through surveys/interactions with prospective customers, industry professionals and other relevant stakeholders to establish a feedback loop. They can thus identify demand gaps which will help them to evolve their products/services accordingly.
3. Repurpose the analysis
Upon completion of the in-depth analysis and customer surveys, they need to determine their next course of action.
Usually, there are two ways forward from this point. The first is to use the analysis to re-launch the old start-up while the other is to launch a new entity using the new data and ideas that address the old problems.
Founders who decide to re-launch their old start-ups often opt for a complete rebranding keeping in mind the challenges they faced the first time. This allows them to keep in touch with their prior consumer community with renewed promises and strategies.
Entrepreneurs opting to launch a new entity must keep a keen eye on addressing the challenges faced in the past.
However, the experience from the initial venture is often integrated within the second organisation, which may operate in a different industry but can, because of the founder's past experience, offer significant advantages over peers and competitors.
4. Build a stronger team
A competent founding team is vital for start-ups at any stage.
Highly qualified, capable founding team members, working passionately towards a shared goal often become the deciding factor for start-ups.
Entrepreneurs need to focus on building a strong team for their next venture to ensure its success.
This team also needs to be versatile so that it can identify opportunities and risks well before time to avert crises that might lead to failure.
5. Craft a robust marketing strategy
Entrepreneurs who have failed their first-time start-ups need to focus on creating a robust marketing strategy for their second term.
Marketing strategies help businesses create meaningful interactions with prospective clients and drive growth.
Statistically, more than half of the start-ups (56.9 per cent) employ a full-fledged marketing team while 20 per cent rely on a single individual to spearhead the marketing initiatives.
This highlights the importance of marketing strategies for start-ups as they can create a unique selling point that helps the brand to stand out.
6. Focus on technological upgrades
The development of new-age technologies such as artificial intelligence has changed how customers are served and how organisations run.
For example, many companies provided after-sale customer care services to big corporations but after AI chatbots were introduced, organisations used them to automate customer service.
Several companies that decided to continue manually interacting with customers were forced to shut down soon after because of the lack of agility when it came to integrating technological upgrades in their business models.
7. Proactive networking
Aspiring entrepreneurs need to initiate and maintain a productive relationship with prospective investors, industry veterans and other stakeholders.
This approach leads to numerous benefits, such as brainstorming ideas, ensuring critical funding, industry insights and valuable advice.
Furthermore, robust networking also translates into a community that will support you and help you grow.
While the popular narrative suggests otherwise, failing start-ups are more common than unicorns -- which has been proved by statistics numerous times.
For example, while India boasted of at least 1.24 lakh start-ups in April 2024, only 114 of them were unicorns.
Entrepreneurs need to understand that failing their first start-up is not necessarily be the end of the line of their entrepreneurial journey.
Going back to the board, analysing mistakes and efficiently addressing them can lead to a successful start-up in the future.
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