Startups versus Business
Episode 3 – Market share
I am going to keep this article short and sweet because the difference in mindset between a Startup and a Business when it comes to market share if fairly straight forward.
BUT before I get into the topic of market share and the differences in thinking between a Startup and micro/small-medium business, I wanted to do a deeper dive on what the statistic was for Startups and Businesses failing.
Without doing a full research project and collecting the appropriate data to confirm the failure rate, I’ve gone to a view articles to provide me with a range. Embroker indicate a failure rate of 90% – but likely to be based on US stats. Still some great stats in that article and worth a read. An article written by Martin Cole, indicates that 3 out of 4 Australian Startups fail within the first three years, according to the International Centre for Trade and Sustainable Development (ICTSD). Another article that I found on Lessons At Startup, indicates that 97% of Startups fail in the first few years. Taking these three articles into consideration, we can safely say that the failure rate for Startups is in the range of 75% to 95%, depending on where the data is collected from.
Why do Startups and Businesses fail?
There are a multitude of articles that can found that discuss the top 10 reasons why Startups and Businesses fail. But what I was looking for is the common ground from these articles. Based on my research and my own experience in working with Startups (and first- hand experience in running my own business), I would narrow the top three reasons being:
- Lack of product-market fit, which is largely due to a lack of understanding of the problem being addressed
- Lack of funding and/or capital – which leads to problems down the road in terms of cashflow and ability to grow
- Lack of skills and/or knowledge
Referring to an article written by Fundsquire, 42% of Startup businesses fail because there’s no market need for their services or products. That is at least 50% of the total that would fail for any reason. So why am I so interested in why Startups and Businesses fail?
Understanding your market is key
As a Startup or Business, you need to ask yourself three key questions:
- What is the problem I am trying to solve?
- Who am I solving that problem for?
- Are they prepared to pay to have that problem solved with my product/service?
If you don’t know the answers to all three, the risk of failure is high.
Bringing it home
Regardless of whether you are a Startup or a Business, the importance of understanding your market is my top three for increasing your rate of success. The mindset for a Startup is to ensure that you address the three questions on a more global dimension and across different dimensions. Whereas a Business would set some limits to focus on one or two dimensions.
As a Startup, I might consider the following responses to the three questions:
- The problem I am trying to solve is difficulty in writing blog posts
- The market that has this problem is global, across multiple industries and across multiple roles
- Yes – people will pay to have this problem solved!
As a Business, I might consider the following responses to the three questions:
- The problem I am trying to solve is access to good quality cakes
- The market that has this problem is regional and rural towns
- Yes – people will pay IF it was accessible
If you want to have a chat about understanding your market, connect with me!