5 major reasons why Internet startups fail

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Lead: We interviewed dozens of internet entrepreneurs who used their success to prove that they had figured out how to survive in the market. Here, the five main reasons why Internet companies fail are explained to all entrepreneurs.

Editor's note: Entrepreneur Magazine's staff and author Richie Mingzhe (Rich Mintzer) interviewed dozens of internet entrepreneurs whose success has proved that they have figured out how to survive in this fickle market. In this edited excerpt, the author discusses five main reasons why some Internet companies have failed in the past, and you can learn from their mistakes.

Before your company starts to run, it's important to know why so many internet companies have done it halfway. Here are 5 big reasons we've summed up:

1. Bad balance sheet calculations. Companies that fail and decline do not at any time produce an accurate financial statement that can show a reasonable relationship between revenue and expenditure. Too many startups spend all their money before they make money. You need to realize that people have to learn to walk and then the little rags to walk slowly before they start to crawl.

When you spend money, you understand, yes, you may need a good team, but they need to trust the company and know there will always be some bad days.

In other words, you don't need a luxury office, or a very experienced law firm or an overpriced consultant. You can use all kinds of financial software on the market to keep your expenses in line with your income.

Tip: Make financial calculations from the first day of business and never stop doing this until you earn enough money to hire a professional accounting and financial analyst to do it for you. And you should check them regularly.

2. There is no income model. The core question for internet start-ups is "what is your income model?" (This is "How do you imagine your company's future revenue source?") Simple form of expression). What is your source of income? How do you want to make money? Potential investors ask this question, potential employees, partners, and people who consider the company's future financial position.

In the early days of internet companies, entrepreneurs may have been lucky to get a lot of unexplained benefits, including advertising revenue and a mix of business with electricity, and in most cases your answer is to accept the pattern. In fact, this is a mistake, because many failed internet companies have proved that none of them really built a long-term viable revenue model. Now, despite the fact that a lot of investors are savvy, simple business logic is still going to go a long way. You need a well-defined source of income. Of course, in most cases, you will actually need more than one source of revenue before you can start your electrical business website.

3. There is no clearly defined exit strategy. Every well-planned venture prepares an exit strategy for investors. Exit strategy is how and when investors will withdraw their investment from the enterprise. The founders of an enterprise should also have an exit plan (sell it, pass it on to your family, etc.), but angel investors, venture capitalists and so on will want to know how and when they will see their investment returns.

What are your possible exit strategies?

1. Listing: The first choice for many internet companies

2. Acquisitions by larger companies

3. Introduce new investors to buy shares of others

It's hard to say which exit strategy is best, but it can be said that some investors call you every few minutes asking when they can cash in and create a lot of anxiety for your CEO. Such things often happen when there is a lack of transparency in investment-even in a pragmatic spirit. This means that in early negotiations with investors (even those who invest in your family), you need to be honest about how and when to get them to take back their investments. Be as pragmatic and conservative as possible in your calculations.

4. No marketing plan. Too many Internet companies start with great ideas, outstanding products or services, and mistakenly believe that if they set up a website, visitors will appear. Entity enterprises in the old adage "location, location, location" based on the establishment of a lot of future success of the dream. For a retailer, the right place generates traffic and the traffic can determine success or failure.

Web sites also need to produce visitors who have the desire to convert to customers. Marketing is essential and must be conceived and implemented even before you start your own website.

5. Blinded by technology. For the survival of your online business, you need technology. But technology cannot and will not solve all your problems. It's just a tool, a tool you use to run your own business, not a think-tank behind your company. Too many internet business owners are overwhelmed by the possibilities of technology, and they forget that even the best technology is not a substitute for business.

The sad truth is that many failed companies could have been successful, though not as big and profitable as the founders had hoped. Finally they screwed up because they forgot that business is business, it needs reliable financial planning, marketing and products or services, plus excellent customer service. While it may be interesting to appear on the cover of a magazine, it is more interesting to have a steady-growing profit-after all, it is no fun to manage a loss-making business.