
Avoid Company Failure: Common Mistakes Software Companies Make
Company failure is every entrepreneur’s biggest nightmare. It’s unfortunately rampant in a highly volatile industry like Technology. However, there are ways to prevent it. Here are some of the best practices in business that will help you avoid business failure.
Technology is dominating the business world. In this modern age, customers are looking forward to seeing more impressive software products. And catering to that demand, companies are directing most of their focus to innovation.
Likewise, investors are pooling significant funds in the software category. In 2021, they’ve already invested $23 billion in the software industry. It’s becoming the most saturated and biggest market, with over 500,000 software companies registered in the U.S. alone.
Unfortunately, a rich industry doesn’t always guarantee a rich business. Company failure is most frequent in the software market because of its fast-paced nature.
Countless businesses tried to ride the innovation wave but met their demise instead; jumping on to the latest tech trends unprepared causes more loss than gain. The truth is that you have to anticipate a whole lot of pivoting in a rapidly changing industry.
With that said, there are certain things you can do to avoid company failure. First is to learn what the common mistakes are.
Common Reasons for Company Failure
There are many reasons why businesses fail. In fact, most entrepreneurs would inevitably go through failure before they can truly succeed. But there is a light at the end of every tunnel. In fact, the survival rate of a business improves once it gets through the five-year mark. It’s simply a matter of gaining enough traction.
Neglecting research
Software companies have to offer a product that effectively delivers on its promise. Technology, after all, is designed to boost efficiency. And business, likewise, solves a problem that hinders it. However, many business owners neglect one important aspect: research.
Research lays the foundation of product building. A business owner may already have an idea for their product or service, but the solution isn’t based on the idea alone. The proposed solution must be tested for feasibility.
Will the market find it useful? A lot of software companies failed because their product neither solves the problem nor do people really care much for the problem. There are also cases where the solution isn’t enough. Customers only pay for something that can genuinely solve their crisis.
Wrong advertising
False advertising is serious; the fine goes up to $2 million. In fact, a brain-training app called Lumosity had to pay for unfounded claims that their program helped prevent Alzheimer’s.
One of the biggest mistakes a software company can make is overpromising its product’s value. Deception is obviously not an appealing trait. Customers don’t buy from brands without integrity.
Whether it’s through omitting certain information or simply lying about features, it’s no good in the eyes of the people and the law. It’s better to invest in a good marketing strategy than to make false claims about a product.
Getting too competitive
To avoid accidents, you’re supposed to keep your eyes on the road. Instead of keeping the competition in a peripheral view, entrepreneurs often make the mistake of looking too much at them. And that’s a car wreck waiting to happen.
The worst thing a software company can do is set its goals based on what the competition is doing. Instead of focusing on their core competencies, they’re looking at what the other business is putting out. This distracts them from channeling their creativity and originality of ideas.
Many times, software companies desperately tried to keep up with their competitors by creating similar products. Remember Windows phone and its failed attempt to outsell Android and Apple?
Or how about Toshiba’s dramatic exit from the PC world? These brands, although excellent in their own right, tried to compete in the wrong product categories. They ended up in painfully costly consequences.
Wrongly using the MVP
Another common mistake in business is wasting resources on the wrong things. Business owners often misunderstand what a Minimum Viable Product (MVP) is for. Supposedly, it represents the potential of your idea by displaying all the essential features.
This doesn’t mean putting out a complete version of it, just the bare minimum. Yet, companies often put too much work on the initial release that if it fails; it’s wasteful.
Keep in mind that an MVP is designed to get feedback from the market. There’s a good chance they won’t respond well to it. Hence, you’re not supposed to spend too much money, time, and other resources on just creating the MVP.
Poor quality
Software is all about quality. No one wants to use an app that barely functions. But there are still businesses that cut costs on software testing. Testing ensures the usability of a product. It has to be done by QA professionals.
Unfortunately, a lot of software companies make the mistake of letting the project’s developer take the tester role. This won’t bode well in the long run as developers and testers have entirely different sets of skills.
Overall, the abovementioned items are just a few reasons for company failure. There are still many hidden factors involved that may also contribute to a business’s downfall. Be sure to examine your practice thoroughly to see what you may be doing wrong.
Handling Company Failure

At the end, when failure is simply unavoidable, it’s best to make a good exit strategy instead. This cushions the loss of business. Full Scale founder, Matt DeCoursey, would say, “plan to fail”. This doesn’t mean becoming pessimistic, rather, it’s taking the safe way out. After all, we can’t predict what happens in a very dynamic market.
Lastly, make the most out of the experience. There’s always a valuable lesson with every mistake. We’ve shared tips on how you can fail forward in Startup Hustle TV.
Work with Full Scale
Planning to grow your business? It’s hard to thread today’s competitive market. You need to plan your expansions carefully to avoid wasting resources or making wrong decisions.
Full Scale can assist you in building and improving your operations. We are a software development outsourcing firm that helps businesses scale. Our wide range of business services is designed to maximize your company’s full potential. Recruitment, personnel management, software advice, and development are just some of the services we offer.
Work with us! Get your FREE Consultation today!