(By Gil Gerretsen) A recent business article declared in it's headline that the biggest cause of startup failure was the "cost of acquiring customers." Interesting headline, dumb writer!
When I attended my university's statistics classes, I learned that you can use statistics to prove just about any point you might want to make. My dad even showed me how he could use irrefutable "statistics" to prove that 2+2=5.
That's what this "reporter" had done. They twisted some statistics to float an idea so they could sell an article and make some money for their dinner table.
More reliable information was recently provided by CBInsights, a machine intelligence platform that captures real-time information on startups, VC firms, and angel investment transactions in the United States.
Their research indicates that 42% of startups failed because there wasn't a market need. That fits with the real world I've seen over the last 25-30 years. Many overly-optimistic entrepreneurs launch a business tackling problems that were interesting to solve rather than those that served a market need.
In other words, they created solutions to problems that didn't exist (or barely existed). Trying to find customers that are not there is obviously always going to be very expensive. So, the cost of acquisition wasn't the problem. The real problem was that there weren't enough customers to begin with!
What's the lesson to learn? Look for problems that LOTS of people already have! Then ask what kind of solution they are looking for. Then, go create that solution. Make sure it's a GREAT solution too!
P.S. By the way, the second highest reason of startup failure is overspending (29%). The third highest reason is not having anyone to provide sanity checks (23%). Fourth was that they unwisely ignored the competition (19%). Pricing and cost imbalances came in fifth (18%).