As a new startup, have you ever wondered if your own company failed or succeeded? In reality, no matter if it’s bad luck, bad timing, or unsuitable business models, many businesses have gone wrong because of many reasons from the early phases. According to the U.S. Bureau of Labor Statistics, about 20% of new businesses fail in their first year, which is a high proportion for entrepreneurs.

Fortunately, various recent research can clarify the biggest obstacles of startups, and knowing the risks could make the difference between whether your own business sinks or swims.

In accordance with a new study of Skynova, which provides easy-to-use invoicing software for small businesses, conducted a survey in November 2022 with 492 respondents including startup founders, and analyzed the collected data from CB Insights to point out the most common reasons that lead to startup failures in 2022.

• Inadequate funding or absence of investors: Based on the statistics from CB Insight’s data, 47% of startups failed in 2022 because of inadequate funding, which is almost double the percentage in the previous year, 2021. 

One of the examples can be mentioned is Meet Hank. Established in 2014 by Louis Aronne and his partner, James Baker, Hank The Square LLC started as a tote bag business. After three years of striving in a market with a really low rate of profit, they almost ran out of funding with no investors. Finally, they decide to invest all of their rest to extend the business category that includes print sweatshirts, print T-Shirts, yoga mats, cushions,… and luckily, their brand changed in a positive way, that develops steadily until now.

• Running out of cash made up for 44% of failures: Besides the lack of funding, this reason can be the result of poor financial planning.

According to a recent Crunchbase report, the data of investments in North American startups in 2022 witnessed a decrease of 63% compared to the previous year as the increasing fears of a potential recession and other factors.

• The significant impact of the Covid-19 pandemic. After the Covid-19 pandemic, the economy has been affected seriously and in a wide range, which is attributed to causing approximately 33% of startup failures. However, this data from CB Insight was lower than 59% a year earlier, which is a positive sign that many small businesses recovered from the pandemic in 2022, although there are still some companies struggling to return to normal. 

Startup success advice from founders

Although it’s obvious that no one can guarantee success, the respondents, also known as the founders, who were surveyed by Skynova had various useful pieces of advice for anyone trying to make their own business succeed.

For the question of whether they’d done differently from the early stages, most of them stand 58% said that they would have conducted market research first. Also, the same percentage decided to have a stronger business plan.

The U.S. Small Business Administration had given similar advice before on its website, that a solid business plan plays a vital role in your startup’s success and is “like a GPS for how to structure, run, and grow your new business.”

Startup success advice from founders

Another extreme necessity that every entrepreneur needs is the ability to improvise and be decisive to change whenever your plans do not work out. When asked for their top advice to aspiring founders, a high proportion of them – 79% – said entrepreneurs need to “learn from your mistakes.”

Additionally, from their experience, 40% of the surveyed founders said they had previously pivoted their startups in one way or another when it’s in danger of failure. And 3/4 of them agreed that pivoting actually led to success.

They also noted that the most common types of pivoting were making changes to their business plans, launching a new product, or improving upon an existing one.

Hence, the skill of realizing your startup is on the verge of defeat and successfully pivoting to avoid all the consequences is vital to every entrepreneur, as CB Insights has shown that a failure to pivot is one of the most common reasons for startup failures.