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Factors causing startup failure


20 July 2022
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Startups are a lucrative business. Known for its business culture that prioritizes creativity, communication and collaboration, startups allow employees to exchange thoughts and ideas.

Creativity and out-of-the-box thinking have made many startups emerge. Despite their rapid growth, startups have many challenges that result in failure.

Causes of Startup Failure

Startups are fast-paced so they must be able to act nimbly in adapting business practices and achieving rapidly changing goals. Reporting from CBInsight, not all startups can follow suit, so several founders put forward several causes of startup failure:

1. Running out of funds or failing to attract new investors

Because money and time are limited, they must be allocated wisely. Otherwise this can make the business fail. Both the ability to secure the company's money and the inability to attract investors to the company's business are equally important. If you don't take quick action, you will run out of time and money for your company.

2. There is no need from the market

A good idea alone is not enough to make a startup survive. To guarantee that your business can last a long time, you have to ensure that the ideas and products you put out have people interested. For example, wedding dress retailer Brideside experienced huge losses after nearly two-thirds of weddings were canceled due to the Covid-19 pandemic in 2020.

3. Losing competition

Despite the platitudes of startups not paying attention to competition, the reality is that once an idea gets market validation, others will try to capitalize on the opportunity. Although, focusing too much on competitors is unhealthy, ignoring them can also be the cause of startup failure. For example, after six months of operation, the streaming service Quibi was forced to stop operating. This failure is thought to be due to the brand being less strong than competitors, and the launch of the service in the middle of a pandemic.

4. Bad business model

The business model is very important for startups, especially if you intend to build a large-scale business. Therefore, founders must be able to exploit potential as an attraction. That way it will be easier to attract investors and fund the business.

5. Regulations or laws

A startup can sometimes develop from a simple idea. However, sometimes entering legal regulations can kill a startup. This is what happened to Kickstarter which was forced to stop operating in December 2019. The failure of the Kickstarter was allegedly due to the United States imposing a 10% tariff on every product imported from China.

6. Price or cost issues

Determining the selling price of a product is not easy. High prices may be able to cover capital costs, but it will be difficult to attract consumers. While building a business that consumers love is important, in the long term it will be difficult for companies to increase profitability.

7. Poorly matched teams

The inability of companies to recruit the right employees is one of the reasons startups fail. A team with diverse expertise is an important factor for a company's success. Apart from that, the team leader must have the same passion, vision and mission as the company founder. Because if one day the company is left by the founder, the company can still continue the business in the same way.

8. Bad timing

The audience's first impression of the brand and product is very important. If you release a product too early, consumers will think the product is not good enough. This will leave a negative impression on the audience, while changing the first impression is very difficult. Meanwhile, if you release your product late you may miss out on market opportunities.

9. Bad product

Startups that only prioritize business on revenue often end up losing money. Many consumers leave brands  because the products they produce do not match what consumers need. If this happens, consumers will turn to competitors and cause their business to fail.

10. Disharmonious team and investor relationships

Disputes between the team and investors can create disharmonious business relationships. The worst thing that can happen when this happens is that investors will refuse to inject funds, so the startup has no funds and is forced to close.

11. Deteriorating pivot

When experiencing a decrease in profits or a decrease in production numbers because it is not in accordance with market needs, startups can change their pivot strategy. This is done to attract consumers and retain business. If the pivot goes bad, the startup will fail.

12. Burnout

With such a fast-paced business, work-life balance is not something that startup employees often get. Therefore, the risk of burnout is very high. This caused many employees to resign, so  the company lost its best team, and stopped operating.

Of course, it's not just startups, there are other types of companies that fail. However, there are many lessons from startup failure that are very relevant for all entrepreneurs. For this reason, pay attention to relevant planning and strategies in building your business.

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Definition of GMS, Functions and Types that You Should Know
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The GMS is a crucial forum where share owners gather to make important decisions that will affect the future of the company.

In it, there are intense discussions about company policies, performance evaluations of leaders, and vital decisions such as structural changes.

In this article, let's discuss GMS in more depth, starting from its meaning, function, to types.

What is GMS?

A General Meeting of Shareholders (GMS) is an official meeting regularly held by a company and attended by the board of commissioners, directors and shareholders.

The GMS has special authority that is not owned by the board of commissioners or directors.

This is regulated in Law Number 40 of 2007 concerning Limited Liability Companies.

To hold a GMS, the company must fulfill the following requirements:

  • The GMS must be invited by the Board of Directors or Board of Commissioners.
  • Notification to shareholders must be made no later than 30 days before the date of the GMS.
  • The GMS is only attended by legal shareholders.
  • Decisions are taken through deliberation to reach consensus. If this is not achieved, a decision is taken based on the majority vote.

GMS function

The GMS is a forum where shareholders have the opportunity to be directly involved in making important company decisions. GMS has a very important function for the company, namely:

1. Establish Company Policy

This meeting is a forum for shareholders to jointly formulate and review company policies for both the short and long term.

For example, whether the company will expand its business to new areas or whether it will launch new products.

These decisions are very important because they will affect the company's future growth and success.

2. Check the Company's Financial Health

One of the main agendas at the GMS is examining the company's financial reports.

Shareholders will look at whether the company made a profit, how much debt it has, and how money was used over the last year.

This is important to ensure that the company is well managed financially.

If there is a problem, shareholders can ask for an explanation and solution from company management.

3. Assess the performance of the Board of Commissioners and Directors

The GMS is also an opportunity for shareholders to evaluate the performance of company executives such as the board of commissioners and directors.

They will see whether the leaders have carried out their duties well and achieved the targets they have set or not.

If their performance is less than satisfactory, shareholders can decide to replace them with other people who are more competent.

4. Establish Dividend and Profit Sharing Policies

When a company makes profits, shareholders need to decide how those profits will be used.

At the GMS, they will discuss whether profits will be distributed to shareholders in the form of dividends or reinvested into the company for business development.

This decision must consider the company's short-term and long-term needs.

5. Amend the Company's Articles of Association

The GMS can change the basic rules that govern the company. These changes could be:

  • Merging a company with another company.
  • Separating a department from the company.
  • Disband the company.

This decision must be approved by the majority of shareholders.

The aim is to ensure that this major change is carried out with the support of many parties so that the company remains stable and has a clear direction.

6. Deciding on the Dissolution of the Company

The GMS can also decide on the dissolution of the company if the company experiences serious financial problems or cannot continue its operations.

This decision is usually taken if the company experiences serious financial problems or cannot continue operations.

Dissolution of the company is the final step and requires approval from shareholders.

Types of General Meeting of Shareholders (GMS)

The GMS is an important forum where shareholders gather to make important decisions about the company's direction and policies.

Based on the time it is held, the GMS is divided into two types, namely the Annual General Meeting of Shareholders (AGMS) and the Extraordinary General Meeting of Shareholders (EGMS).

Annual General Meeting of Shareholders (AGMS)

The AGMS is held at least once a year, no later than six months after the company's financial year ends.

The following are several important agenda items that are usually discussed at the AGMS:

  • Company annual report.
  • Company financial reports.
  • Dividend distribution.
  • Appointment and dismissal of members of the board of commissioners and directors.
  • Changes to the articles of association.
  • Merger, consolidation or separation of companies.

Extraordinary General Meeting of Shareholders (EGMS)

The EGMS is held to discuss and decide on extraordinary or urgent matters that cannot be postponed until the next AGMS.

The following are some of the agendas that are usually discussed at the EGMS:

  • Changes to the articles of association.
  • Merger, consolidation or separation of companies.
  • Appointment or replacement of curator.
  • Postponement of debt payment obligations.
  • Filing a bankruptcy petition.
  • Termination of business activities.

General Meeting of Shareholders Mechanism

A GMS is an important meeting that is strictly regulated in accordance with the applicable regulations in the company's articles of association.

The following are the main stages in the mechanism for holding a GMS:

1. Summons to the GMS

The summons for the GMS must be made by notifying all shareholders no later than 30 days before the implementation date.

The invitation must state the time, place and agenda that will be discussed at the meeting.

This is done to ensure that all company stakeholders can manage their schedules and participate in important discussions.

2. Validity of the GMS

To be considered valid, the GMS must be attended by shareholders representing more than half of the total shares with voting rights of the company.

If the number of members is not met on the first day, the GMS can be continued on the next working day provided it is attended by shareholders representing more than 1/3 of the total number of shares with voting rights.

This is important to ensure that the decisions taken at the GMS reflect the will of the majority of shareholders.

3. Discussion of the GMS Agenda

The GMS agenda includes various strategic matters that influence the company's direction and policies.

Shareholders have the opportunity to discuss and decide on the company's annual report, financial reports, dividend distribution, appointment or dismissal of members of the board of commissioners and directors, as well as changes to the company's articles of association.

Decisions at the GMS are reached through deliberation to reach consensus. If there is no agreement, the final decision is taken by majority vote.

4. GMS Report

After the GMS is held, an official report will be prepared by the notary who was present at the meeting.

This report records the results of discussions, decisions taken, as well as voting results on each agenda item discussed.

The GMS report must be submitted to all shareholders no later than 30 days after the GMS is held. The aim is to ensure transparency and accountability of the company's decision-making process.

As explained above, the GMS is an important forum for shareholders to participate in monitoring and making strategic decisions for the company.

By following this clear and orderly mechanism, the GMS ensures that every decision taken is the result of a transparent and fair discussion in accordance with the interests of all shareholders.

Want to expand your knowledge in the business world? Register yourself in the corporate valuation program from prasmul-eli.

In this program, you will gain an in-depth understanding of company valuation and improve your strategic decisions in the financial sector.

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David Altman, PhD, Chief Research and Innovation Officer at the Center for Creative Leadership (CCL), has noted, “The journey to elevate women is not just a moral imperative; it is a strategic necessity.”

The World Economic Forum reports that closing the gender gap will take 149 years in South Asia and 189 years in East Asia and the Pacific. Women remain underrepresented in top positions across both the private and public sectors. According to Fortune, women accounted for only 10.4% of Fortune 500 CEOs in 2023. It is clear that the lack of progress is not due to a lack of ambition among women.

Despite advancements in education and employment opportunities, women in Indonesia still face significant challenges in career development. The female labor force participation rate was around 53% in 2021, a figure that has seen little change over the past two decades. Many women are stuck in low-productivity and low-paying jobs, and the gender gap in labor force participation remains one of the largest in the country.

A significant number of women leave the workforce after marriage and childbirth. The difficulty of balancing childcare responsibilities with work obligations is a major obstacle to their productivity. The shortage of quality childcare services, lack of family support, and cultural values that prioritize women as primary caregivers force many women to leave their jobs.

Research conducted by CCL, in collaboration with Prasmul-eli, underscores the issue of women's leadership in the Asia Pacific region. The study, titled “Elevate The System: We do not need to change women — we need to change systems,” reveals that Indonesian women with families often handle most domestic responsibilities, leading to burnout and fatigue. The prioritization of family remains a significant barrier to women's career advancement.

For a detailed analysis, download the full report for free at the following link.

Gardhika Waskita Pakqi
Resident Assessor prasmul-eli

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Managerial Skills as the Foundation of Leadership Success
28 June 2024

Aspiring to get a promotion as a manager in the company or just got the promotion? When occupying a leadership position in a company, there are skills required, one of which is managerial skills.

In the complex and competitive world of business, the success of an organization often depends on its leaders' ability to manage teams, projects and resources efficiently.

A skilled manager must not only understand the technical aspects of their job, but must also have a variety of other skills that enable them to lead effectively.

So, if you want to have good managerial skills to boost your career, read this article to the end, okay?

Definition of Managerial Skills

Managerial skills are the ability to organize employees so they can do their jobs better. Not only must a leader have it, but managerial skills need to be learned by everyone for career success.

Basically, someone who has good managerial skills can be more adaptive to various decisions or business directions from the company. Not only useful for yourself, managerial skills will also help the company develop further.

By continuing to sharpen managerial skills, a work team will be created that is more able to collaborate to complete work. Of course, this will be profitable so that the company can continue to run and innovate with the support of its employees.

Types of Managerial Skills

Here are three types of managerial skills that you need to understand and apply:

Technical Skills

This type involves knowledge for a specific field. With extensive knowledge, a manager will use special techniques that he learns to achieve his goals within the company.

Some examples that need to be understood regarding technical skills for managerial skills are work planning, increasing sales, and so on.

Conceptual Skills

Types of conceptual skills include understanding, how to think, and how to formulate ideas. With this concept, a manager can see an idea in outline, analyze it, and find out what action plan is needed.

Managers with good conceptual skills will usually better understand the advantages and disadvantages of choosing a work plan and can overcome them by making additional plans.

Interpersonal Skills

This type of interpersonal skill refers to how managers interact, work, and relate effectively with coworkers. This skill allows a manager to utilize human resources in the company and also motivates them.

Of course, the hope for the future is that the team can work better and produce something the company needs to develop.

Examples of Managerial Skills

To understand better, here are six examples of managerial skills that you need to pay attention to and learn!

Communication

Communication is the key to success. In managerial skills, a manager with good communication skills will tend to be more successful.

The reason is, by having good communication skills, a manager can convey information clearly and be understood by various parties. Apart from that, the better a manager's way of communicating also influences the quality of his team's work.

Planning

A manager must be able to plan or plan. This type of managerial skill is really needed because it will have an impact on the way you work in a team.

The planning skills possessed by a manager help him to create something that is visionary and still pay attention to obstacles and goals. Apart from that, in planning a manager must be able to do the following things:

  • Critical thinking
  • Think logically
  • Think strategically
  • Analyze the problem
  • Program management

Decision Making

Decision making is another example of managerial skill. The success of a company or organization depends on the decisions taken by superiors within it.

In order for a plan to run smoothly, it is necessary to make the right decision in every situation. A manager who is able to make effective decisions in every situation will help the company develop further.

Problem Solving

A good manager can solve problems in an effective way and prioritize common interests. Problem solving in a company also involves identifying problems and then reaching conclusions about how to solve them.

This managerial skill does not only apply to the interests of the company, miscommunication and other things can occur within the team while working.

Delegation of Tasks

A manager who has this ability is certainly able to reassign tasks or divide tasks within the team. With this managerial skill, a manager will better understand who is suitable to carry out the task and can do it more efficiently.

Delegation helps managers optimize their productivity and helps teams gain new learning or skills.

Motivation

Another example of a managerial skill that needs to be learned is how to motivate. A manager who can motivate his team is a valuable asset for the company.

Motivation triggers desired behavior or responses from employees. There are two types of motivation used by managers, namely intrinsic motivation and extrinsic motivation.

If a manager has mastered managerial skills, of course this will have a good impact on himself and the team. It doesn't stop there, having good managerial skills can also motivate other employees to learn more and have an impact on the company's success.

The company's success in question is synergy within the team to achieve company goals and continue to grow.

Want to learn more about managerial skills? prasmul-eli has a special short leadership program that you can follow. The program is held for two days with various materials that help you to sharpen your managerial and leadership skills in the team.

Not only the leadership program, Prasmul-eli provides other short programs for you professionals who want to increase their knowledge. The program is designed to be short but still provides the essence and employs facilitators who are experienced in their fields.


Find further information on various short programs at Prasmul-Eli now by clicking this link!