Top 6 Challenges Faced by Start-up Entrepreneurs
Starting your own business is a significant milestone. However, the entrepreneurship journey is not a walk in the park, and many start-ups don’t survive long enough to fulfill their intended objectives.
Knowing what to expect and how to overcome challenges in business is crucial for success in this field. Most entrepreneurs are not experienced in business strategy and may need an initial push.
Read on to discover the key challenges most entrepreneurs encounter and how to tactfully manage these challenges to realize growth and success in your venture.
1) Raising adequate capital
Entrepreneurs can raise capital for their start-up ventures by borrowing from friends and family, plowing back savings, borrowing from banks and other lending institutions. However, the harsh reality for most entrepreneurs is that savings and donations from family and friends are, in most cases, unlikely to meet your business’s capital requirements.
Furthermore, banks and other cash advancing institutions shy away from financing entrepreneurs who lack collateral. Additionally, unlike mature business establishments, start-ups lack sufficient cashflows necessary for repaying loans advanced by banks and lending firms.
To overcome capital financing challenges, entrepreneurs can improve their situation by having a solid and feasible business plan to earn the confidence of lending institutions. Additionally, it helps to own property such as a car, machinery, and other equipment that you can use as collateral when sourcing for funds. Lastly, consider pitching your business ideas to government-operated institutions and NGOs with a track record of working with start-ups and small businesses.
2) Cashflow management
Consistent cash flow is vital in keeping your venture a going concern. Businesses that generate steady cashflows can comfortably manage operating expenses that may include employee salaries, rent, electricity, administration costs, and inventory purchase.
Unfortunately, freshly established businesses tend to encounter severe cashflow constraints that may arise from supply chain irregularities and a low pool of clients. Delayed invoices and bounced checks are other common issues that contribute to cash flow problems.
Consider shortening your billing cycle to void cashflow constraints arising from delayed invoices and failed transactions.
For example, while a 45-day billing cycle might be attractive to potential clients, it might expose your newly founded business to cash flow constraints. Shortening the billing cycle to 30 days or 20 days can be more beneficial in the long term.
Secondly, consider negotiating with your suppliers and vendors to extend the invoice period to allow you ample time to collect outstanding receivables. Lastly, consider including down payment and pay on delivery policies, especially for online transactions. Down payments will increase cash in hand that is essential for managing day-to-day tasks.
3) Hiring competent staff
Success in business largely depends on the firm’s ability to hire employees that add value to the organization. However, hiring can be a tedious process leading to many entrepreneurs preferring to go alone or employ close friends and family to help with day-to-day management. Start-up businesses face many uncertainties and will require experienced hands to guide them out of this volatile phase.
Entrepreneurs of start-up ventures should hire qualified and competent staff who are knowledgeable about the industry. Seek references from trustworthy sources to save time during the hiring process. When hiring employees, treat all prospective candidates as potential business partners and look out for leadership, work ethic, dedication, and integrity qualities.
4) Stiff industry competition
The business world is ultra-competitive. Businesses compete for clients, market share, and visibility in the online space. While competition is natural in business, start-up ventures are the most vulnerable due to their common understanding of industry operations compared to mature companies.
To overcome competitor challenges, entrepreneurs should study their markets well before venturing into business. Be keen on unexploited market niches to improve uptake of your products and services in the market. Pay attention to customer feedback, especially when it involves comparisons with your competition.
5) Marketing and branding
Businesses excel on the foundation of solid marketing strategies. Unfortunately, beginner entrepreneurs struggle to identify the best mediums to reach their target market. A poor marketing strategy will translate to low sales volumes and weak revenues, making the overall venture unprofitable and uneconomical to run.
Target marketing is an excellent way to boost your business’s return on investment. Building a solid marketing strategy starts with assembling a capable marketing team. Alternatively, you can outsource the marketing role to specialists who have detailed knowledge about the industry and competitor strategies. These specialists will help increase your start-up’s visibility which will translate to higher sales volumes and revenues.
6) Self-doubt and lack of confidence
Sometimes, businesses fail because the entrepreneurs lack confidence in their abilities to overcome challenges and realize success. Constant roadblocks can gradually erode an entrepreneur’s mental resolve, especially when there’s a lack of a good support system. While feelings of doubt are inherent in most entrepreneurs, there are ways you can suppress self-doubt.
It helps to have a support system comprising of people who understand your business goals and challenges. Secondly, it is crucial to establish and maintain networks with seasoned entrepreneurs familiar with the challenges facing your business.
Summary
Entrepreneurship often involves taking on a significant amount of risk. Statistical studies show that many start-up businesses fail within the first two years of establishment. This guide highlights the top six challenges that start-up entrepreneurs face and how to overcome them.
Challenges are inevitable on the road to success. Anticipating challenges and overcoming them is crucial in building a learning curve in any business. Perseverance, hard work, and intelligent strategies are critical in overcoming most roadblocks in business.