Aspiring entrepreneurs who dive into the on-demand business must also think about the mistakes they may commit. Everyone cannot become Uber or Netflix. There are over 250+ on demand startup business across the world and not everyone is successful. Many reasons can be attributed to the failure of an on-demand business, while some reasons can be easily identified from the failures of other business.
Dinnr is a web platform that delivers ingredients with a recipe to create meals at home. It was founded in 2012 and closed in 2014. The founder of this startup cites No market as the reason for the failure.
Lesson: Just because you have a problem doesn’t mean that a solution should be found. Sometimes the problem may be trivial, even if you tell the people about the solution, they receive it graciously but may not support it. So, do a complete market research and find whether the problem really matters to the people.
This is an app to trade, sell or buy worn clothes. Sounds great right? But the reason for the failure is because its co-founders bailed out after some time.
Lesson: Having the right partners is as important as how fuel is to vehicles. It is okay to spend some time to find partners who have the same ideas and the same line of thought as ours. Good understanding with the partner can help business big time. Only the company suffers if there is a tiff between the founders.
Lesson: When the margin for your product/service is negative, chance of profit is slim. Such unsustainable business can never survive even after a lot of funding from outside. Don’t start a business if it can never be profitable.
It is a home cleaning app which connects professional cleaners with customers and collects money on per hour basis. This San Francisco based on demand startup was closed five years after its inception in 2010. The startup grew rapidly, expanding in Canada and Europe. More than one reason is cited as the reason for its closure. The fast expansion has burned a hole in the pocket of its founders. Also, the company charged $19 for a service where others charged $85. This made a dent in the economics of the company.
Lesson: Without clear financial management in the area of scalability, expansion and service cost can affect the business big time. So, it’s imperative to focus on financial management before anything.
This startup is an example of how well-funded venture can also fail. This India based food delivery app cannot sustain even after a lot of rounds of funding because of high overheads, poor service from restaurants and a negative margin. It suffered badly when it undertook a layoff after its merger with a logistics firm.
Lesson: As I said earlier, poor financial management force the business to stare down the barrel.
Apart from the above reasons, there are few fundamental things an on-demand startup business should look into which 90 percent of them overlooks.
- Putting entire energy on building the product leaving little regard for customers: The startup should put the customers first. More than 40 percent of startups fail because of no market need. One cannot sell an outstanding, impeccable product/service when there are no customers to buy it. Improving a product/service by getting feedback from customers is secondary. First, find whether there are any takers for our product/service.
- Building a complex solution for a simple problem: Take Uber, they found a simple solution for creating an affordable, convenient way to commute. The solution to a problem should be as simple as the problem unless it demands. Providing complex solution can lead to chaos and change the path of the business.
- Poor marketing: You may have a good team, service, business model and economics but abysmal marketing may help our competitors dominate us. Getting our service to the customers involves the medium in which the marketing is done. Social media marketing will attract millennials, print media marketing will attract people between 30 and above. So, find the target customers and make sure the service reach them.
There are many implicit reasons for an on demand business to fail, but above are some of the obvious factors