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Why do start-ups fail? 90% fail in the first 5 years – Top 11 reasons

One of the absolute favourite topics of the listeners are the reasons of failure. What exactly is the reason why nine out of ten start ups fail to survive? A look at CB Insight’s analysis reveals the 20 biggest errors in startups.

Failure – Top 11 reasons

Go geht´s! Here are the top 11 reasons why so many start ups fail in the first 5 years:

Place 1 – The market does not need them

The third Burger Restaurant in the street, another brand that Cola offers in the beverage trade, a new car brand with a combustion engine that wants to be at the forefront. Who needs that? Nobody! Therefore the missing market is also number one when it comes to the failure of start ups. Your product fails because there is no need for it.

Place 2 – the money goes empty

The absolute classic and also often mentioned here: Finances must always be solidly planned and of course also handled in the operative business. If you calculate projects incorrectly, you will quickly run into difficulties with payments. Once this point has been reached, there are, unlike with private individuals, hardly any deadlines and certainly no postponement. You didn’t pay the rent? The business landlord can sue you almost immediately if the payment reminder and reminder are through. Employees are not paid? They’re understandably quicker gone than you can look. The supplier doesn’t get his money? Then you won’t get any more goods. No goods, no deliveries, no sales. Financial problems, number two in the list of reasons why start ups fail.

Place 3 – The wrong team

When it comes to personnel, there is of course a lot to consider, but in the end it all depends on the entrepreneur and the right decision as to who should be in the team and who should not. If these decisions are made wrong and the wrong people are hired without the right knowledge and motivation, a project can fail in the long run. After all, the person costs money and in the end nothing is earned, which is why follow-up costs arise due to lost profits. Your team must therefore be well selected, trained and able to deliver practical performance.

Place 4 – The competition gets you ready

Sounds hard, but it is! Especially in the area of software, the possibilities of adopting concepts are fast. Of course, this also applies to simple products. Producers in the Far East can copy any kind of product if they have the necessary small change.

A friend of mine had a successful cereal bar. Approximately 15 months after its foundation, the same product came onto the market from a large manufacturer. The direct competition stood overnight on all supermarket shelves. The name, almost identical. The composition, same. The outfit, right away. To compete as a start-up against the international food company is a big challenge. Competition can quickly destroy the business, especially when the business idea is particularly easy to adopt. That’s why you need a good entrepreneur who stands completely behind the whole, has experience and knows how to compensate your own deficits and how to position your own brand skilfully next to the competing product. At the end also an absolute success story, sold!

Place 5 – failure by price and cost

Determining the prices of products is not easy with under! The more difficult it is to quantify a product, the more complex the price calculation becomes. A screw, for example, can be quantified quite accurately. A certain material price, a certain production time, certain electricity and personnel costs. Ultimately, an exact figure of 0.37 euros net per screw is on sale. Whoever opens a start-up in the field of influencer marketing has a much more difficult time. How exactly can two postings plus one story be calculated from a specific person with a specific number of followers, an individual number of interactions? Each offer is correspondingly costly and time-consuming. Find the right price so customers can access your job. Ultimately, that’s exactly how it can fail. In the same part, the costs for procurement, for example, for material, are added. If you don’t manage to reduce costs over time, your profits won’t rise, or will rise very slowly. The profit lies in purchasing!

Place 6 – Your product is bad

Honest but true, your product can also just be bad! The workmanship is not right, the quality, the shelf life is poor, but maybe you’re just harvesting a Shitstorm because your product is discredited because of a quality that hasn’t been considered before. Everything was right and in the end only one detail was decisive for the entire business model to collapse. The same can of course happen if you can’t keep up with your competitors in a certain period of time. If, for example, a new industry is opened, such as bus transport in Germany or, for some time now, electric scooters, then the development in the market is extremely fast. Business models adapt within a few weeks, after one or two years the first competitors merge and after three or four years the market clears itself of its own accord. If your product can’t keep up with the market fast enough, people will buy from the competition.

Place 7 – gaps and errors in a business model

Here is a good best practice model from the United States. A big music festival, with big investors. Location of the mega festival should be the island of the former drug baron Pablo Escobar. Everything was discussed with the family, the island was allowed to be used on the condition that no advertising was made with the name of the family. Of course that’s exactly what was done and directly advertised in the first commercial that the festival takes place on the former private island of Pablo Escobar. Spontaneously the contract for the location was cancelled and the whole festival fell into the water. The reorganization within a few weeks is therefore impossible. After all, it was (at least announced) the biggest festival in the world. Financed with millions, it has now become an absolute debacle. A clause that brought everything to failure.

But it can also be a financial investment product. Instead of keeping winnings on your bank account at zero interest, you want to invest them profitably. Market fluctuations were not included in the planning. Suddenly there is a dent, worldwide and due to trade conflicts. The price goes to the cellar for a short time. Option A: You still sell your papers to be able to pay the employees for this month. But you don’t want to sell either, because your capital is tied to the financial product. Option B: You keep the securities in your portfolio, because next week the prices could go up again. What to do now, with the best will in the world, is no easy question.

Place 8 – bad marketing

Already the legendary Henry Ford – he revolutionized assembly line work and thus the automobile industry – said, “for every dollar you put into your product, you have to have another one ready to make your product known”. Many invest enormous sums in the business model, logistics, storage and personnel. They forget that the product has to sell in the end – how much space and financial resources do you give your marketing? Sales only take place when people come into direct contact with your product or service and are satisfied. You can have a great idea, but if the right people don’t hear about it, the whole business model will fail.

Tip! Especially multipliers are important, experts and people with a large community. But even these have to be reached, convinced or booked. However, it is worth investing time in such individuals with a high reach because they potentially reach far more people than traditional brand advocates. In the restaurant it is the free dessert for the blogger, in the online shop the personal letter for ordering a magazine. Because of course you assume that the order is a test. You got a celebrity ordering, or a management? Also here a personal cover letter should be with it or a few free products, otherwise nobody feels really addressed. With a bit of luck, the person will mention you to Instagram, for example, or become a regular customer and order regularly from you.

Place 9 – ignore customers and opinions

Criticism, especially constructive criticism, is worth its weight in gold for you as an entrepreneur. If you want to understand criticism positively, then simply see it as free market research. People take time to look at your product, test it. In the end, they even give a rating. Learnings that should be included in the entire product development process as well as the development process of your own brand and services. Very few people rate products or services after a single use. As a rule, the consumer simply resorts to a competing product for the next purchase, a situation that must be avoided at all costs. This is why it is so important to react to the opinions of the customers and to include them in the own development process and direct contact.

Tip! Respond to every review and comment. No matter whether it is the algorithm in a search engine or the one in a social network, the own interaction is measured. The faster you react to requests, ratings and comments from users, the higher your ranking will rise.

Place 10 – The wrong time

Some investments can also be made too early, just as companies can be founded too early. But trends also emerge and disappear within a very short time. If you want to play on Amazon, for example, and constantly place new trend products here, you have to be on your toes when it comes to timing. This year the “Flamingo for the swimming pool” may not be a trend anymore and you will sit on 5.000 pieces. Your product may even have been trendy at the beginning of summer, but due to the constant rain in midsummer, the trend and thus the sales dropped again. Next year it may become the ultimate trend with the post of an influencer. Not everything is in your hands, some things you just have to take as they come.

The wrong time may be too early, but definitely also too late! That is why market analyses and your assessment of the market development are extremely important. When you think about the perfect moment. Until the development and the organization are completely through, so that you can operate viably in the market, it can take months from brainstorming to financing to the first customers. While a product is still totally hip today, it can be “out” again in a few months. Also consider the cyclical movement of seasonal business, trends and product half-lives.

Place 11 – You lose focus

Point number 11 always makes me feel at home! After making the ultimate decision to become an entrepreneur with staff, offices and international relationships, I focused for two years. Before that, I worked for many other companies, as a one-man advertising agency, so to speak. I’ve done more than 100 projects, I’m just talking about the bigger ones, not about 100 pizza flyers at the beginning and probably 400 logos in total, from iBeacon technology to the pharmaceutical industry, automotive tuning and scene clubs. From this varied work it was really difficult to focus on one project for two years. Of course, I didn’t just do that during that time, by the way, I also set up a fashion magazine as a satellite project for the model agency and a short time later, due to the upcoming inquiries for influencer marketing, a social media agency. At the beginning of this year alone, three book publications, real estate portal and investment in the music industry. I’d like to do 20 more projects and start ups right away! But stop! Here I always remember reason number 11 of failure, you lose focus.

For me, this means fewer new construction sites, more a large high-rise building, building stone by stone. My own little daily fight! As a little inspiration I grabbed an empty DIN A4 sheet sometime in the evening. It only has two letters on it. The abbreviations of the company on which I want to focus (proportionally, most). It’s been sticking over my bed for a year now, so I can see it every morning and every evening and remember every time what my focus is on.

But most of them fail because of basic things! As a rule, they set the wrong priorities, too much partying, too much free time, too little active work. If you focus too much on your own leisure time and too little on the company, you’re in for a knockout.

Buy your own apartment – procedure, costs, advantages & disadvantages

As soon as you move into your first own apartment, most people say: rent, rent, rent. Every month you go to work many hours to spend most of your time on the next rent, which is due at the beginning of the month. No wonder that many young people become friends with the idea of buying a condominium as soon as possible.

Buy a condo – What to consider?

The purchase of a real estate brings many advantages, but also disadvantages with itself. When the word property comes up, most people first think of the classic single-family home. But condominiums can also be an interesting alternative. If you are thinking about whether it might be useful for you to buy a condo, then you should definitely stick to this article until the end. We not only tell you the advantages and disadvantages of buying a condominium, but also explain the necessary requirements and the procedure.

Advantages

Before one deals with the prerequisites and the procedure, one usually asks oneself: What are the advantages of buying a property for me? The answer to this question depends on various factors.  If you have previously lived in a rented apartment, then the following advantages arise for you:

1. Money in everyday life & security in old age

If you have saved enough money to buy an apartment, you are exempt from monthly rent payments. That means for you a lot more money a month that you can spend on other things. Whether it’s one or two holidays, restaurant visits or special events, life can be made more varied without rent payments.

If you pay off your condominium in installments, you look forward to the possibility of saving your hard-earned salary and spending it on something else at some point. Usually it is a dream of a lifetime, which should be fulfilled, like a high-quality expensive car, or a holiday home.

It is not uncommon for older people to find themselves in a situation where, after working hard all their lives and finally having time to travel, they do not get enough pension to fulfil their dreams. If they live in a condominium, they are exempt from the rent and can invest their pension in beautiful things.

  • no monthly rental payments
  • More money for beautiful things in life
  • Saving for life’s dream
  • Ageing protection – spending your pension on other things

2. No fear of problems

If you are a tenant of an apartment, you always have to expect that your landlord will register your apartment as personal use. No matter how the situation arises, the notification is often a shock for the current tenants. No wonder, because this notification means stress. As quickly as possible a new rented apartment must be found, which is not only affordable, but also where the location and other criteria are right.

But if you’re the owner, you don’t have to worry about such things. Nobody can kick you out because you alone decide how long you want to stay in your apartment. Even if you decide that you want to emigrate, you can do so, rent your condo and earn money at the same time.

  • No fear of being thrown out by landlords
  • Earn money by renting is possible

3. Freedom of decision

When it comes to the design of a rental apartment, there are often regulations that are determined by the landlord from the outset. Although it is permitted to paint the walls or change the floor coverings, nothing in the building fabric may be changed. So if you want to remove a wall or have something rebuilt, this is not possible without further ado.

However, if it is your property, there are no limits to your creativity. You can design your home the way you like it and feel good about it.

  • Creativity without limits
  • high feel-good factor

Disadvantages

Despite the many advantages, it is also important to consider the negative side of buying a condo. Here we have two disadvantages for you, which you should not ignore for your decision.

1. Administrative expenses

An apartment means care. No matter if you move into your apartment yourself or if you decide to rent it out. From now on there is no longer a landlord who is responsible for the maintenance of the apartment. That means you have to take care of everything yourself. If you are a landlord yourself, you must always be approachable for your tenant. For the maintenance of your apartment there are compulsory costs, which you have to pay.

  • Apartment requires maintenance
  • Landlord must be available for tenants

2. Neighbors

A big disadvantage when buying a condo are the neighbors. Of course you can be lucky to have the ideal neighbours who will never disturb you and who will always make you happy to meet you next time. Unfortunately, this is not often the case. If you are unlucky, after buying the apartment, neighbours move in with whom you do not get along well. Unfortunately, there is often no right of co-determination here.

  • No guarantee for pleasant neighbours

Search condominium: Private or real estate?

If you decide to search for a condominium, you must ask yourself important questions beforehand. One of these important questions is whether you want to find your condo privately or hire a real estate agent. Many people reject the idea of hiring a broker immediately because it is assumed that hiring a broker is automatically associated with high costs. In some cases, however, this is a misconception. If you would like to find out more about the advantages and disadvantages of hiring a broker, we have an interesting article for you.

Costs of purchase

But how do the costs of a condominium actually make up? What are the components of the price you pay for a condominium? There are various factors that influence the purchase price of a home. One of the most important factors is the city. Is it a popular city where many people want to live, or is it an unknown smaller city? The more popular the city, the higher the property price. The location within the city also plays a role. Living right in the city centre close to sights, shops and in the midst of the hustle and bustle tends to be more expensive than an apartment on the outskirts.

Another important factor is the condition of the apartment. When was the last time the apartment renovated, what value-enhancing elements are installed? If there is any damage in the apartment, this will also affect the price. For this reason, it always makes sense to take a close look at the interior of an apartment.

Especially if you decide to live in an apartment on the outskirts of a big city, it is all the more important to have good transport connections. If this is the case and one can be in the city centre with a car within a short time, this also increases the value.  Not everyone who decides to buy a condo also automatically has a car. Not to mention the fact that many people also rely on public transport when their car is broken. A good transport connection also ensures that the value of your property increases.

On the real estate market there are always local prices, at which a real estate price orients itself. Depending on how much similar properties are worth in your area, this will also affect the price. So if you’re looking to buy a condo but don’t have too much money, it might be worth looking in a region that isn’t quite as popular.

As you can see, there are many different factors that affect the price of a property. If you have limited financial resources, you can go through the points and consider which points in the list are not so important to you. If you can compromise with yourself, this could have a positive effect on the property price.

  • City
  • Good transport connections
  • Extended infrastructure
  • Regional property market
  • Condition of the apartment

The financing of a condominium

What are the actual financial models? This question is particularly important for those who want to buy a condo but have not saved enough to pay for it immediately. We have found different financing models for you, so that you can consider whether one of the possibilities is suitable for you.

The most popular cities in Germany

Job or study

Apartments are wanted everywhere. The most popular condominiums are in the major cities of Berlin, Munich and Hamburg. No wonder, because most people would like to live in one of the big cities. Here we have a ranking for you, which describes the 10 most popular cities. The northern German port city of Hamburg is repeatedly regarded as the most popular city in Germany. No wonder that the demand for housing is not necessarily low. Rental properties as well as condominiums are in high demand here. In Hamburg there is not only the beautiful Alster, but also the Speicherstadt and the HafenCity. But why is that so? Why does everyone want to live in the big cities?

Usually it is one of three reasons why you decide to move to one of these cities. One of these reasons is the job or the study. It can happen very quickly. Suddenly a job that is better paid is offered in another city and you are faced with the question: Should I move and leave my hometown? For most, the answer is clear, because a better salary can make a huge difference in life. Suddenly you have money for something you never dreamed of. The money for a second family vacation in the year, for a new car, or also for a monthly attendance in the Kosmetikstudio.

After graduating from high school, almost all graduates feel the same: out of their familiar environment and into a new adventure. Even if for many it is often only a stay abroad that is chosen, others decide to study in a completely different city. What is the best way to become self-employed? Exactly by freeing yourself from your parents and learning to stand on your own two feet. Often it is not only the isolation from one’s parents that makes one move to another city to study, but sometimes the desired course of studies is only offered in another city, so that one is forced to move.

Love

Another reason that is often responsible for a move is love. Many know it, the partner is forced to move to another city because there is a job offer waiting for him. But what is the horror of most partnerships? A long-distance relationship. Very quickly the decision is made and one decides to accompany the partner. The search for a rental apartment or condominium begins and presents most couples with a difficult task. The new life in one of the most popular cities in Germany begins.

New life

Many have had the situation before. Nothing in life goes the way you imagined it would. The job burdens you more and more, old friends turned out to be false friends and in love you are always unlucky. Many then come to the point where they say: A new beginning must come here. Everything that connects one with the old life is replaced, the apartment is terminated, the job is terminated and the contact to old friends and acquaintances is completely broken off. Also for a new beginning one of the most popular cities of Germany is chosen gladly. No matter whether Hamburg or Munich the search for a rented apartment, a condominium or a house is particularly difficult in these cities. It is therefore not uncommon for many people to decide to hire a real estate agent. You will also find out in this article which advantages result from this.

Ranking of the most popular cities:

  1. Hamburg
  2. Dresden
  3. Munich
  4. Lübeck
  5. Freiburg
  6. Berlin
  7. Potsdam
  8. Trier
  9. Weimar
  10. Düsseldorf

Tips: Step by step to the condo

You have weighed the pros and cons sufficiently? Your decision has been made and you want to take the plunge and buy a condo? Then you will now learn the exact procedure so that you can prepare yourself sufficiently.

Since spending a sum on a condominium is not just a matter of time, but an important decision for life, it is important that you prepare sufficiently. You should therefore first become aware of how much money you have available and develop a suitable financing plan. It is advisable to contact a professional, because he can inform you about possible risks.

  • Draw up financing plan

If the result of this consultation is good enough, you can start looking for a suitable property. Now you can make up your mind: Would you prefer to search privately for a property, or would you rather hire a real estate agent?

  • hire a real estate agent
  • Find and check real estate
  • land register entry, payment & object transfer

Art of the apartment – The differences

New building or old building?

If you are looking for an apartment, you should also consider whether it makes more sense to look for an old building or a new one. Do you know the differences between an old and a new building? It is correct that all buildings whose building permit was issued after 30.06.1953 are new buildings. However, there are many other differences. The special features of old buildings are the high rooms, the imposing facades, large windows and wing doors. New buildings, on the other hand, are characterised by a modern design. We have listed the advantages and disadvantages for you, so that you can quickly decide what is more suitable for you.

New construction – Advantages

If you decide to build a new house, you will benefit from the fact that you will have to pay low ancillary living costs because the thermal insulation is greatly improved. In general, it can be said that the latest technologies are usually used for a new building. If you decide to have a property rebuilt, you have the possibility to incorporate your own wishes into the design.

old building – advantages

You will notice one of the biggest advantages of an old building as soon as you enter such a building. An old building with a beautiful facade can enchant. You enter such an apartment and the ceiling is very high in contrast to new buildings. A high ceiling combined with an imposing chandelier can look like a small castle. Even if you are not interested in making your old building apartment imposing, there are many other possibilities to use an old building apartment. Since the ceiling is so high, most rooms are particularly suitable for special bunk beds.