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10 Reasons startups fail before reaching problem-solution fit

Most startups and businesses fail. CEOs of these companies attribute their failure to lack of product-market fit. But often businesses fail because they are not able to reach a problem-solution fit.

Having a problem-solution fit really means that your product is solving a particular problem or catering to a need of a customer. And if your product is indeed helping the customer, is the customer willing to pay a price in return for using the product?

In this post, let’s look at the reasons why startup businesses fail at the problem-solution fit stage. If you are a founder at the idea-stage, you might want to check our post on 11 reasons why startups fail at the idea stage instead. Also if you run a startup, you might also want to take some of our business assessments to make better decisions for your business.


1. Not making products people want

Often when we build products, we have some notion in mind about what we want to build and then build it without asking people for feedback. We end up with a product no-one wants. Startups fail because they fail to make something people want to buy. So make sure that you have a specific user/customer in mind when you are building something.


2. Building solutions in search of a problem

Often when we come up with an idea for a startup or a new product, we unconsciously think in terms of ‘solution’ instead of ‘problem’. Startups often follow a similar approach and come up with a solution looking for a problem. People that look for and understand problems outperform founders who seek solutions.

“You can’t build things that users like without understanding them.” – Paul Graham


3. Not building an MVP

According to Gall’s law,

“A complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works and cannot be patched up to make it work. You have to start over with a working simple system.” 

An MVP is the earliest version of your product with the least amount of features to create value for your first customers. It’s the first shippable version of a product. An MVP allows for the most learning possible with the least amount of effort.

Building an MVP comes down to finding the right balance between – minimum and viable. If your MVP fulfills only the “minimum” requirement but it’s not viable, you’re building a product that nobody wants. If the MVP fulfills the “viable“ requirement and not the minimum, you’re overthinking a product without knowing if there is a market for it. Only when the MVP is balanced, a startup can quickly capture value.


4. Building too slowly

Linkedin founder and investor Reid Hoffman said

“If you are not embarrassed by the first version of your product, you’ve launched too late.”

Many startups die because they want to launch a perfect product where there is no such thing. Launching a product slowly can kill your startup because, by the time you launch, you run out of money to market or have competitors or customers’ tastes have changed or maybe your customers don’t like your final product.

Don’t try perfecting your product. Just launch the first version of your product asap and keep improving on the product based on feedback from users.


5. Not being able to develop an MVP

There are so many tools available to build prototypes and mockups. If the founding team can’t build the product on their own, or with a small amount of external help from freelancers, startups are probably not for them. Consider bringing on an additional team member or a co-founder who has the required skills and knowledge to fill the holes.


6. Not asking for help

The best way to learn is to learn from other people’s mistakes. There are many advisors, consultants, or even other startup entrepreneurs who have gone through the journey. There’s no harm in asking these people for advice.

Spend time looking for a good mentor you can trust and who has a genuine interest in the success of your venture. Find the right mentor and it can be a win-win for both you and your mentor.


7. Spending money on the wrong things

In the early stages, every penny is precious. So spend wisely. Don’t spend thousands of dollars on domain names, expensive software, nice logos, luxury offices, and building the best website.

Cherish every dollar. Even if you have raised venture capital, treat it like it’s your own personal savings.

Decision making assessments for startups

8. Underestimating sales

Sales is something most founders are not good at. But on the bright side, if you are a founder and sales is a new thing for you, it’s a great opportunity to learn a new skill.

Doing sales will not only help you improve your sales skills, but will also give you an opportunity to understand customers better.


9. Thinking that products will sell by themselves

Building a great product is a necessary but not sufficient condition to make a startup business successful. A good business strategy needs a mix of strong products and strong marketing & sales.

Even for a company like Apple, it was Steve Job’s showmanship and salesmanship that helped generate the initial sales for products like the iPod and the iPhone.


10. Saying ‘Yes’ more often than ‘No’

Doing a startup has a huge opportunity cost. If you do a startup and fail after 5 years, you not only miss out on the salary or income you could have earned doing something else. Add to that the investment you have made out of your pocket. It’s a huge cost. So be prepared to say ‘No’ to anything that doesn’t fit into your plans of what you want to achieve.

It’s hard to say no. So start practicing it immediately. In the early stages of business, your resources are limited in terms of both money and people. So you have to be very thoughtful about what you put your efforts into.

FAQ: Common Reasons Why Startups Fail at Problem-Solution Fit

1. What is problem-solution fit? Problem-solution fit refers to the alignment between a product or service and the specific problem it aims to solve for customers. It involves ensuring that the product adequately caters to customer needs and that customers are willing to pay for the solution provided.

2. Why do startups fail at the problem-solution fit stage? There are several reasons why startups fail to achieve problem-solution fit:

  • Not making products people want: Startups may fail to involve potential users and gather feedback during product development, resulting in a product that lacks demand.
  • Building solutions in search of a problem: Instead of identifying and understanding existing problems, startups may focus on creating solutions without a clear target problem in mind.
  • Not building an MVP: Failure to create a Minimum Viable Product (MVP) with the essential features necessary to provide value to initial customers can hinder learning and market validation.
  • Building too slowly: Delays in product launch can lead to missed opportunities, depleted resources, and changing market dynamics, negatively impacting a startup’s chances of success.
  • Not being able to develop an MVP: Insufficient technical skills within the founding team can hinder the development of an MVP, making it difficult to bring the product to market.
  • Not asking for help: Lack of mentorship or guidance from experienced advisors and entrepreneurs can prevent startups from learning from others’ mistakes and obtaining valuable insights.
  • Spending money on the wrong things: Poor allocation of resources, such as excessive spending on non-essential items like expensive software or luxury offices, can drain a startup’s funds prematurely.
  • Underestimating sales: Founders who overlook the importance of sales and fail to develop effective sales strategies may struggle to generate revenue and reach customers.
  • Thinking that products will sell by themselves: Relying solely on product quality without investing in marketing and sales efforts can hinder a startup’s ability to attract customers and drive sales.
  • Saying ‘Yes’ more often than ‘No’: Failing to prioritize and focus on core business objectives can lead to wasted time, resources, and missed opportunities, increasing the risk of failure.

3. How can startups overcome these challenges? To overcome these challenges, startups can consider the following strategies:

  • Conduct thorough market research to identify real customer problems and validate the demand for potential solutions.
  • Emphasize user feedback and incorporate it into the product development process.
  • Build an MVP that strikes a balance between minimum functionality and viability to test the market quickly and gather valuable user insights.
  • Adopt an agile approach to product development, launching the initial version of the product as soon as possible and iterating based on user feedback.
  • Seek external expertise or consider partnering with individuals possessing the necessary skills and knowledge to fill any gaps within the founding team.
  • Reach out to mentors, advisors, and other entrepreneurs to seek guidance and learn from their experiences.
  • Prioritize spending on essential aspects of the business, making efficient use of resources and maintaining financial discipline.
  • Develop sales and marketing strategies early on, ensuring a strong focus on customer acquisition and revenue generation.
  • Recognize the importance of effective salesmanship and develop sales skills to better understand customer needs and drive product adoption.
  • Maintain a strategic mindset, saying ‘No’ to opportunities that do not align with the startup’s core objectives and divert resources away from key priorities.

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