What to do if your startup fails: insight from entrepreneurs who’ve started again

Why startups fail: the common mistakesExperiencing failure in a startup can be a challenging and emotional experience. It’s important to take some time to process your emotions and reflect on what went wrong. Analyzing the reasons for the failure can provide valuable insights and help you avoid making similar mistakes in the future.

Networking with other entrepreneurs and seeking advice from mentors can offer guidance and support. While it may be tempting to give up, it’s important to stay resilient and keep an open mind to new opportunities. Failure is a natural part of the entrepreneurial journey, and learning from it can help you grow and succeed in the long run.

Entrepreneurs are known for their passion and drive to create a world-changing idea, and they pour every ounce of energy into their startups to make their dreams come true. However, despite their efforts, statistics reveal that a significant number of UK startups fail within the first few years, with 1 in 5 not making it past the first year and a staggering 60% falling short within three years.

The reality is harsh, and with over 340,000 new UK businesses registered in the first half of 2021 alone, it translates to a considerable 48,000 startups closing their doors in just six months. As an aspiring entrepreneur, how can you prevent your business from becoming a part of these statistics?

Why startups fail: the common mistakes

Many startups fail for various reasons, ranging from financial mismanagement to market saturation, and it is essential to identify and address these potential pitfalls before they become insurmountable obstacles. One common mistake that startups make is a lack of market research and validation.

Entrepreneurs may have a great idea, but if there is no market demand or a market already saturated with similar products or services, the chances of success are low. Another common mistake is a lack of adequate funding, either because the startup did not raise enough capital or because it mismanaged its resources.

Startups need sufficient funds to cover their expenses, invest in product development, and grow their business. Mismanagement of finances can also lead to poor decision-making and eventual failure. Another factor that can contribute to a startup’s downfall is a lack of a clear business plan and strategy. Startups need to have a well-defined vision, mission, and goals to guide their growth and decision-making.

Without a clear roadmap, startups can lose their focus and direction and fail to make meaningful progress. Finally, startups may fail due to poor team dynamics, lack of leadership, or insufficient talent. Founders need to build a strong team of skilled and motivated individuals who can execute the startup’s vision and work together towards its goals.

A lack of cohesion, communication, or expertise can severely impact a startup’s success. In summary, startups fail due to a combination of factors, including poor market research, insufficient funding, a lack of clear strategy and planning, and weak team dynamics. To increase the likelihood of success, entrepreneurs need to identify and address these common mistakes proactively.

There is little to no demand for your product.

One of the most common reasons why startups fail is due to the lack of demand for their product. It is a crucial aspect of any business to have a market that is willing to pay for their product or service. It is essential to conduct thorough market research to identify the demand and potential customers for the product before launching it. Startups that fail to do so may end up developing a product that no one wants or needs, resulting in a lack of revenue and eventual failure.

Additionally, the market is constantly changing, and startups need to keep up with the latest trends to remain relevant. Failing to adapt to the changing market conditions and consumer preferences can result in a decline in demand for the product. Startups need to be agile and flexible in their approach to ensure that they are meeting the needs of their target market.

Another reason why startups may fail to generate demand for their product is due to poor marketing strategies. It is essential to create a buzz around the product and reach out to potential customers through various channels such as social media, advertising, and public relations. Failing to create a strong brand image or adequately communicate the value proposition of the product can result in a lack of interest from potential customers.

Startups that fail to generate demand for their product often face an uphill battle. It is vital to conduct market research, stay up to date with changing trends, and create effective marketing strategies to ensure that the product is meeting the needs of the target market. Without a demand for the product, startups will struggle to generate revenue and may eventually fail.

Read more: Number of businesses that fail in the UK

Poor marketing

Poor marketing is one of the most significant reasons why startups fail. Startups often make the mistake of assuming that their product will sell itself, but this is rarely the case. Without proper marketing, potential customers may not even be aware of the product’s existence. Startups need to create a strong brand image and communicate the value proposition of their product through effective marketing strategies.

This includes identifying their target market, understanding their needs and preferences, and reaching out to them through various channels such as social media, advertising, and public relations. Failing to create a buzz around the product or failing to communicate its unique selling points can result in a lack of interest from potential customers.

Startups must invest in marketing to ensure that their product is reaching the right audience and generating the necessary demand to sustain the business. Without a strong marketing strategy, startups are unlikely to gain traction and may eventually fail.

Overcomplicating your product/service

Overcomplicating the product or service can lead to increased development costs, longer development times, and potentially drive away customers. While it is essential to offer unique features or functions to stand out from the competition, too many features can overwhelm potential customers and make the product difficult to use.

You should focus on offering essential features that solve a problem or meet a need for their target audience. Simplifying the product or service can also reduce the time and cost of development, allowing the startup to launch and iterate quickly. 

How entrepreneurs deal with failure

Entrepreneurs are well-aware that failure is a part of the journey towards success. They know that not every idea will be a hit, and they will face obstacles and setbacks along the way. Entrepreneurs deal with failure by viewing it as a learning opportunity rather than a defeat.

They analyse what went wrong, identify areas for improvement, and use those lessons to refine their approach or develop new ideas. Entrepreneurs also have a resilient mindset that enables them to bounce back quickly from failure. They do not dwell on the past, but instead, focus on the future and what they can do to achieve their goals.

Moreover, entrepreneurs often seek support from their network of peers, mentors, and advisors when dealing with failure. They know that they cannot do it all alone and that having a support system can provide them with the guidance and encouragement they need to overcome obstacles.

Talking to other entrepreneurs who have faced similar challenges can provide a fresh perspective and offer new solutions. Additionally, entrepreneurs use failure as motivation to work harder and improve their skills. They recognize that success does not come overnight, and it takes hard work and dedication to achieve their goals. In conclusion, entrepreneurs deal with failure by viewing it as a learning opportunity, seeking support from their network, and using it as motivation to work harder towards achieving their dreams.

What the experience taught them

Dealing with business failure can be a challenging and humbling experience for entrepreneurs. However, it can also be an opportunity to learn valuable lessons about themselves and their approach to business. One of the most significant lessons entrepreneurs learn from dealing with business failure is the importance of resilience.

They learn that setbacks are a part of the entrepreneurial journey and that success often comes from perseverance in the face of adversity. Additionally, entrepreneurs learn the importance of being adaptable and flexible in their approach to business. They recognize that the market is constantly changing, and they need to be able to pivot and adjust their strategies accordingly.

Finally, entrepreneurs learn the importance of having a strong support system in place. They realize that they cannot do it all alone and that seeking guidance and support from their network of peers, mentors, and advisors can make all the difference in overcoming obstacles and achieving success. Overall, the experience of dealing with business failure teaches entrepreneurs valuable lessons that they can apply to future endeavors and helps them become more resilient, adaptable, and resourceful in their approach to business

How to avoid failure through market validation

Market validation is the process of gathering information and feedback from potential customers to confirm whether a product or service has a viable market demand. This process is crucial in avoiding failure because it provides insights into the needs and preferences of the target market, helping entrepreneurs make informed decisions about their business strategy. The following are some key steps to take when conducting market validation:

  1. Identify your target market: Knowing your target market is critical in determining whether your product or service will be successful. Conduct research to understand the demographics, psychographics, and behaviors of your target audience. This will help you tailor your product or service to meet their specific needs and preferences.
  2. Gather feedback from potential customers: Engage with potential customers to gather feedback on your product or service. This can be done through surveys, interviews, focus groups, or social media. The feedback received will help you identify areas of improvement and make necessary adjustments to your product or service before launching it to the market. By taking these steps, you can avoid failure and increase your chances of success in the market.

In conclusion, market validation is essential in avoiding failure in business. By taking the time to identify your target market and gather feedback from potential customers, you can gain valuable insights into the needs and preferences of your audience. Armed with this information, you can make informed decisions about your business strategy, and increase your chances of success in the market.


Startups are known for their high failure rate, with many failing within the first few years of operation. One of the main reasons for this is a lack of market demand for the product or service. Many startups fail because they have not conducted proper market research to determine if there is a need or demand for their offering.

Another common reason for failure is poor management and leadership. Founders may lack the necessary skills and experience to manage a business, or may not have assembled a strong enough team to support their vision. Additionally, startups may run out of funding before they can establish themselves in the market, or may face stiff competition from established players in their industry. Overall, startups must navigate a complex landscape of challenges and obstacles in order to succeed, and failure is unfortunately a common outcome for many.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.