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5 Signs Your Startup Is Destined to Fail It's never too early to address harbingers like consistent turnover and your own cluelessness.

Edited by Dan Bova


I've been in the entrepreneurial community long enough to have seen some strange things. I've seen good businesses go under. I've seen seemingly thriving startups suffer from cash-flow problems. I've also seen some under-the-radar contenders emerge out of nowhere to take over an entire competitive market. The entrepreneurial journey is complex, volatile and unpredictable, and surface factors are rarely reliable as metrics for determining a business' course.

Related: 6 Lean Startup Lessons From the Co-Founder of the Lean Startup Company

Not that I'm one for absolutes. I definitely believe that almost any solid business idea has the potential to spawn a successful company -- but it takes more than a good idea and an optimistic leader to gain significant traction. Most businesses that fail don't fail suddenly, but rather as the result of a problem that's existed from the beginning. The trouble is, these problems rarely make themselves evident until it's already too late.

Below, I've detailed a handful of these potentially devastating problems for you to examine in closer detail -- and take action on. If you don't, these same problems may very well serve as harbingers of your business' demise:

1. You haven't changed your original idea.

Think about your original idea for the business, whether that was last week or two years ago. What was your vision? What were your main goals? Who was your target audience? Now compare that idea to your present business. Make a mental note of everything that's changed.

Have you repositioned your product to target a different audience? Have you added something new to differentiate yourself from a new competitor? If you haven't changed a single thing, you might take that as a sign that your idea is strong -- but, actually, it shows that you're unwilling to adapt. No idea is flawless, so don't be afraid to make iterative improvements.

2. Your employee turnover is high.

Do you have the same team you originally started with? Saying "no" to that question isn't necessarily a bad thing, especially if your lineup has changed. In addition, startups are notoriously volatile, and young workers are especially prone to making frequent career jumps.

However, if you find that your employees are consistently leaving after only a limited time on the job, that's a bad sign for the future of your company. It could be that these jobs are too confusing or demanding, that there aren't any areas for development, that the inner workings of the company don't meet expectations -- or that those departing employees foresee the pending death of the company. None of these signs bodes well for your future.

Related: Is Declining Business Failure Holding Back Entrepreneurship?

3. Consumers aren't talking about your company.

In a startup, most entrepreneurs focus on the number of customers they have (as this is closely correlated with revenue and profit). However, instead of quantity, you should focus on quality: Look at the customers you do have (however many or few that is), and look at what they're saying about your company.

Are they engaging with you on social media? Are they leaving reviews of your business? Are they coming back for more purchases? If nobody is talking about your company, despite ongoing operations, that's a bad sign for your company's future.

4. You don't really know how you're doing.

If you've consulted an article like this because you have no real read on how well your company is doing, I have some bad news for you. The very fact that you don't know is a sign that your company is headed in a bad direction.

As the entrepreneur, you should be the most informed about your current customer base, your cash flow, your available revenue, your operating costs and even factors like market demand and competition. If you're truly clueless about your company's performance and potential, you haven't been doing your homework -- which means your company's under some shaky leadership.

5. You haven't improved anything.

What have you modified or improved in the last few months? Have you implemented a new customer service procedure? Have you pushed an upgrade to your servers? Have you offered a new product that your competitors can't match? Startups don't survive by picking a direction and following it religiously; they succeed by constantly improving and making changes to infrastructure, production and relationship management along the way. The market is a living, breathing ecosystem, and if you aren't evolving alongside it, you're going to get left behind.

The nice thing about these signs is that none of them is completely out of your control. As long as your business hasn't already entered the downward spiral of declining consumer trust and evaporating startup capital, you have time to make adjustments and reposition your company for success.

The two biggest killers of businesses are negligence and stagnation. So, as long as you stay cognizant of your surroundings and keep working for something better, you'll always have a chance to succeed. For more insights on building a startup that's destined to succeed, see The Modern Entrepreneur: How to Build a Successful Startup, from Beginning to End.

Related: 5 Ways to Keep Fear of Failure From Holding You Back

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