When starting a business, entrepreneurs are often under the impression that a great business idea will last them in the market and is enough for longevity and success. They fail to realize the massive gap between an idea and its implementation, which is where most businesses go wrong. In fact, the failure rate of startups in the U.S. is quite demoralizing, with about 50% of startups failing within the first five years and about 20% of them not even making it to a year (Forbes, 2018).
While many factors can contribute to a startup failing, lack of planning and executions seems to top the list, and here’s why. Strategic Planning is the single greatest factor that can contribute to a business’s success or failure. Strategic Planning, also referred to as Strategic Management, can be defined as creating a business plan, strategies, execution, and evaluation of the results of execution. Most businesses fail to understand how to strategize their product or service and, most importantly, the “how” of strategy implementation. A business strategy is basically a business plan, and a plan without execution or relevant concrete and actionable efforts is worthless.
According to the research briefs by CB Insights, “The Top 20 Reasons Startups Fail,” the number one reason being no market need and hence, no customer. Lack of market research can result in not identifying an opportunity gap and, as a result, not solving any market problem. No matter how great your idea is, if you are not meeting customer needs and fail to solve a market problem, your idea will fail. Similarly, any changes brought about, whether to pivot or not to pivot, should be calculated.
While it is important to invest heavily in planning, it is of utmost significance to have the resources, the team, and the capabilities to execute the idea and succeed. Hence, strong strategic planning is a practice that startups should adopt to ensure the sustainability and profitability of a business.