Why Startups Fail: A Brand Identity Perspective

Good news everyone! Fewer Welsh startups are failing than at this time last year, and British SMEs in general are enjoying record levels of investment. This really is a very exciting time to start a business. That said, we’ve all heard much more sobering statistics about startups – ‘did you know that such-and-such-a-percent of businesses fail in their first year?’ is a common refrain. The reasons given for those failures will also be familiar to a lot of entrepreneurs. This week, I’m looking at a few of the typical reasons that a new business might fail, and the ways in which brand identity might help save the day. 

 A meteor strike is not a typical reason for business failure. But you never know.

A meteor strike is not a typical reason for business failure. But you never know.

No Business Plan

‘Failure to plan is planning to fail’, so the old saying goes. While there may be some debate about the relevance of the business plan in its current form, the world pretty much agrees that a plan of some kind is essential, and the vast majority of business advisors still recommend the traditional 40-page tome.

A well-developed brand identity perfectly supports both the development and design of an effective business plan. One of the key objectives of brand identity is to align the broader objectives of the brand and provide a framework for strategic decision making for both the short and long-term. This is achieved through mission and vision statements, as well as through brand values. You can probably imagine how that takes a lot of the stress and uncertainty out of the process of creating a business plan.


Lack of Funding

This ties in neatly to my previous point. I mentioned that brand identity can also support the design of the business plan. By this I mean that the document itself can be creatively formatted to reflect the brand’s visual identity – the logo, colour palette, typography, motifs and so on. Think how much more convincing that will look to a potential investor. I’m not talking about style over substance – I’m talking about having both.

Of course, any serious investor is ultimately going to be more interested in the contents of a business plan than its presentation. Even so, we’ve all been in situations where our first impression has coloured our judgement a little; perhaps the cover of a book or the formatting of a job candidate’s CV. It doesn’t do any harm to take control of that first impression by presenting potential investors with a strong brand identity from the very first moment. Not only will the creative and professional presentation put them in a receptive frame of mind, they’ll also know at a glance that you’re serious about building and managing a first rate brand. That can only increase the chances of securing funding.


Failure to Understand the Customer

‘If you build it, they will come’ is not a phrase that’s often used in business, mainly because it almost never holds true. Carefully tailoring a product or service offering to a specific demographic, and courting that demographic in a manner that they’ll engage with, is vital to the success of any enterprise.

Understanding your customers and developing brand identity go hand-in-hand. You have to understand your demographic in order to create an effective brand, and having an effective brand allows you to engage more successfully with your demographic. Market research, whether it’s primary or secondary, and whether it’s undertaken by the business or the branding agency, is pretty much step one if you hope to build a brand that has any real value. Nothing connects better with customers than brand communications that are tailored just for them.


Not Cost Competitive

There are lots of reasons why a business may not be able to compete on cost; high overheads or inefficient production, to name two examples. You may be thinking that there’s no way brand identity can possibly help to alleviate those factors, and you’d be right. What is can do is turn the problem on its head. 

As I discussed in an earlier post, having strong branding imbues a product or service with a certain degree of perceived value. That value is very hard to quantify (in fact it’s pretty much the quantum physics of the business world), but it’s there. If you have a stronger brand than your competitors then you don’t necessarily need to worry about competing on cost at all. This won’t work for all sectors and products, but in the vast majority of cases it will at least help ease the burden – the more effective the brand identity, the more disparity customers will be willing to tolerate between your competitors’ pricing and your own.


Lack of Differentiation 

It’s a question that almost every startup faces; if you’re offering essentially the same thing as an established competitor, why should people buy from you instead of them? Brand identity development in its modern form exists primarily as a solution to this very question.

When properly executed, the thing that brand identity does best is differentiate a product or service from the competition. As the number of businesses has increased, and the gaps between them become narrower, the challenge has become greater. In many cases, differentiation is now only possible by highlighting the differences in barely tangible factors, like a unique approach to the customer experience or service delivery. I like to imagine branding professionals as alchemists, transmuting those seemingly insignificant differences into gold. Poetic analogies aside, if there’s one cause of business failure that brand identity was made to eliminate, this is it.



If you're starting a business and appreciate the value of effective brand identity, explore the Brandsworth website and discover the affordable branding agency for startups in Wales.