Why 90% of New Businesses Fail

…and how yours doesn’t have to

Let’s get something out of the way: most new businesses don’t fail because the founder “didn’t want it badly enough.” They fail because reality is undefeated.

Multiple studies land in the same neighborhood: the vast majority of startups don’t make it, and the unicorn endings are rare. Startup Genome is often cited for the “90% fail” figure, and it’s paired with an equally spicy stat: only about 1.5% reach a $50M+ exit across top U.S. ecosystems.

Your odds aren’t terrible because you’re not brilliant. They’re terrible because business is a contact sport.

The good news (because we’re about solutions around here): the biggest failure causes are predictable. Which means they’re preventable.

1) Mismanaged finances

aka, “death by cash flow”

CB Insights consistently ranks running out of cash as the #1 reason startups fail. And yes, you can “grow” your way into bankruptcy. Sales up, cash down is a thing. A rude thing.

What it looks like in the wild

• Being profitable on paper when the bank account says otherwise

• Hiring too early, spending too fast, scaling before the foundation holds

• Overly optimistic forecasts

• No real cash reserve for surprises…and surprises always show up

How to not be that story

• Build cash flow projections you can defend in a room full of skeptics

• Track inflows/outflows weekly

• Keep a real reserve, not “whatever’s left at the end of the month”

• Plan for best-case and worst-case scenarios. Life loves plot twists.

Bold truth: revenue is vanity, profit is opinion, cash is oxygen.

2) Lack of demand

The market didn’t RSVP

CB Insights also reports 35% of startups fail because there’s no market need. Translation: building something cool is not the same as building something customers want to pay for.

What it looks like

• Everyone loves the idea but nobody buys

• The target market is wrong, too small, or too expensive to reach

• The offer isn’t meaningfully different from competitors

• The product solves a problem that people don’t care about

How to fix it

• Do customer interviews

• Run MVP tests and iterate based on behavior, not compliments

• Use surveys, focus groups, and industry research to map the real landscape

• Set up feedback loops and be willing to pivot when facts show up

A product must address a real need. If there’s no demand, even the best idea becomes an expensive hobby.

3) Bad management

Leadership matters

Your team can be talented and still get taken out by messy leadership. Rydoo’s breakdown cites McKinsey research that ineffective leadership and management contribute to nearly 25% of startup failures.

What it looks like

• Roles are fuzzy and accountability is fuzzier

• Founder does everything and becomes the bottleneck

• Conflict simmers, decisions stall, priorities change daily

• No coaching, no feedback, no leadership development

How to not self-sabotage

• Write clear job descriptions for key functions, even if “key function” is you for now

• Hire for what you don’t do well and build a team with complimentary skills

• Evaluate leadership like it’s a core business system (because it is)

• Train managers early

Vision starts the business. Management keeps it alive.

4) Not tracking performance indicators

You can’t fix what you don’t measure

A lot of businesses don’t fail dramatically. They fail quietly, one bad month at a time. because leadership teams don’t have early warning signals.

What it looks like

• Decisions based on anecdotes and intuition

• Nobody knows the exact customer acquisition cost, churn, runway, or margin

• Problems are discovered after they’re expensive

What to track (minimum viable sanity)

Pick KPIs that match your model, but many businesses should know:

• Cash runway: How many weeks/months you can survive

• Burn rate: How fast you spend

• Gross margin: Are you making money on what you sell?

• Customer acquisition cost (CAC) and lifetime value (LTV)

• Conversion rate, retention, churn

• A few operational KPIs that predict delivery and quality

KPIs aren’t micromanagement. They’re headlights.

5) Lack of planning

The root cause nobody wants to admit

Here’s the boring hero: planning.

The University of Georgia SBDC says it plainly: many small business problems can be summed up in three words: Lack of Planning. A thorough plan lets you “make mistakes on paper rather than with your livelihood,” and business plans aren’t just for startups.

What planning actually does

• Forces you to validate assumptions before you spend money

• Surfaces pricing problems, cost realities, and market barriers early

• Clarifies your strategy so you’re not pivoting every time someone posts on LinkedIn

Planning doesn’t guarantee success. It does dramatically reduce “avoidable chaos,” which is where most businesses go to die.

The “Do More Good” way to beat the odds

If 90% fail, your job isn’t to panic, it’s to prepare. Here’s your practical path forward:

• Get honest about cash flow

• Validate demand with real buyers and real behavior

• Build a team that covers your blind spots

• Pick KPIs that warn you early

• Write the plan that makes your risks visible and solvable

Remember: Failure isn’t mysterious. It’s usually unmanaged.

Go manage it, then go do more good.