THE BLOG
01/21/2014 05:03 pm ET | Updated Mar 23, 2014

The 5 Ways Most Startup Tech Companies Fail

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Understanding the most common failure points of startup tech companies can help you improve your own business model and avoid those pitfalls.

Startup tech companies fail. Often. More often than most entrepreneurs would like to admit. When you have a bright idea for a new product or new brand, it can seem like nothing will be able to stop you from developing it into a success, but the harsh reality is there are more potential traps to avoid than there are chances to become a breakout success.

The massive tech giant superstars of the past few decades have risen to power in a seemingly short period of time. Though each of them has struggled with drawbacks and periods of strife, the public perception is that any tech entrepreneur with a solid idea can make it big. While that potential certainly does exist, the thousands upon thousands of potential breakout startup tech companies that have failed seem to be significantly less noticed.

In order to avoid such a fate, you need to be wary of the five ways most startup tech companies fail:

1. Lack of uniqueness. You have competitors. What makes you different? Why would people choose you over anyone else? If you can't answer these questions, your idea could be poised for eventual failure.

2. Brand mismanagement. Your brand could be inconsistent, failing to keep your customers interested. It could be nonexistent, failing to entice new customers. If your business model or brand aren't strong and consistent, you'll face major problems with growth.

3. Inconsistent or unpredictable revenue streams. If your business plan is overly ambitious or ambiguous, you'll have difficulty realistically predicting your revenue during the first few years of growth. Back up your projections with research, and be conservative to avoid overextending your budget.

4. Poor customer relationship management. Even if you have the customer base, you won't be able to maximize retention unless you have a clear-cut, consistent customer relationship management strategy. Keep your customers interested with regular follow-ups and small rewards.

5. Inflexibility. This one is much broader, and much more difficult to identify in a black-and-white way. Being inflexible as an entrepreneur means being unable to respond to changing circumstances. Your product isn't going to develop as quickly or perfectly as you want it to. Your customers aren't going to respond exactly the way you think they will. The key to staying in business is adapting to those new pieces of information.

I'd be lying if I said building a startup tech company wasn't an uphill battle. It takes a lot of time and effort to succeed. But if you pay attention to the basic principles of solid business management and avoid the common failure points, you'll be in a far better position than most.

Jose Vasquez is a serial entrepreneur and tech enthusiast dedicated to helping startup technology companies get the direction and momentum they need to succeed. As the founder of Build. Brand. Blast., Jose has established a collective resource for tech entrepreneurs to consult when brainstorming, creating, launching, or expanding a new business. Jose is also the founder and CEO of Quez Media Marketing, a marketing firm that combines technology and creativity to help new and growing companies get the results they need.

Jose graduated from Goldman Sachs' 10,000 Small Businesses program. Goldman Sachs is a partner of the What Is Working: Small Businesses section.

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