Layoff wave: How entrepreneurs can evade the start-up collapse

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According to Union Minister Piyush Goyal, there are approximately 75,000 businesses in India, and the start-up ecosystem in that country has so far generated 7.46 lakh jobs. “These figures demonstrate the strength of a vision. A vision of innovation and business driving growth, “Goyal sent a tweet.

Although the stats paint a positive picture, the reality appears to be different. Indian start-ups are suffering. Start-ups might fail for a variety of reasons. Indian start-ups are collapsing for the following reasons:

Sahil Arya, Co-Founder, and Director at Fat Tiger, claims that founder errors are the main reason for firms’ failure. “In reality, more so than the inherent allure of a business concept, I will always place my bets on the competent founder(s)”. An idea can succeed if its founders are tenacious, steadfast, and possess deeper understanding of their business. Even if the concept is not outstanding, a skilled entrepreneur will put forth the necessary measure of effort and steer the company in the appropriate direction. For your start-up to expand in the proper direction, I also think that the right time and place are equally vital.

According to Delphin Varghese, Co-Founder and Chief Business Officer of Adcounty India, recent research shows that major businesses fail at a rate of 90%. This is essentially the result of an inability to predict the market effectively and a lack of readiness to handle changing market situations, such as the Covid-19 pandemic.

In addition, business failure results from the inability to create a lucrative growth model where the cost of obtaining a customer is less than their lifetime worth. Additionally, inadequate cash flows brought on by investors pulling out or poor product pricing frequently cause firms to fail. Finally, weak managerial abilities, poor hiring procedures, and flawed marketing all contribute to firms failing.

Start-ups fail for a variety of reasons, according to Raghunandan Saraf, CEO, and founder of Saraf Furniture, including inadequate market demand and a lack of the necessary skill sets. Nevertheless, inadequate cash flow management is something that is frequently disregarded. It has constantly been noted that entrepreneurs have a passion for technology and innovation. They devote a lot of effort to the product, but they lack strong financial judgment. This may lead to issues with cash flow like low margins, a lack of unit economics, higher operating costs, cash burn, etc.

Aachho creator Rimjhim Hada believes that one of the main causes of so many start-ups failing and then laying off workers is that they overestimated growth and went on a recruiting binge with heavy investment into their company.

India was ranked as having the third-largest start-up ecosystem in the world, behind the United States and China, in the Economic Survey 2021–22, which was published in January 2022.

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