The rate of applications for new businesses has never been higher. 55% of entrepreneurs have cited the need to be their own boss as their key reason for starting a business, but perils still remain to this urge to strike out on one’s own. Statistics show that the failure rate of new businesses is quite high; 20% of new businesses fail after 2 years, 50% after 5, and 70% after 10.
Knowing how your business could fail is essential when it comes to succeeding as an entrepreneur. “Instead of fearing failure, become acutely aware of what could cause failure in your business or industry and build a tool kit for how to deal with it,” says Lak Ananth, CEO and managing partner of venture capital firm Next47, in his recent book Anticipate Failure. He argues that the valuable lessons failure provides can be the key to success.
According to Ananth’s research, these are the five biggest reasons why entrepreneurs fail:
1. Failure to assess the market
2. Failure to build a successful team
3. Failure to create a distinct product
4. Failure to get the tech right
5. Failure to finance your business
Aspiring entrepreneurs would do well to study each of these reasons before starting their new businesses, and come up with a plan to address them in order to mitigate the risk of failure.