With over 150 million startups in the world, the space for standing out in a specific market is becoming more and more saturated every day. About 137,000 startups are being found daily in the world today. This begs the question of whether it really is a smooth sail all around for startups? Do all of them go on to become multi-million-dollar ventures? Surely not. In reality, a startup faces several challenges that can become daunting to overcome. In this article, we will talk about such common challenges faced by startups.
What is a startup?
According to Investopedia, a startup is a company in its first stage of development or operations. These companies are founded by entrepreneurs who want to introduce a product or service in the market based on its demand.
The initial phase of the product or service requires several trials and errors associated with R&D, marketing, business model, and cost of operation. As a result, these companies work as a high-cost- limited revenue venture in their initial stage. To compensate for the high cost, there are different stages of fundraising to ensure smooth business operations.
Top 7 common business challenges faced by the startup founders
The high number of startup competition across the globe means there are lesser and lesser opportunities for emerging startups. Most markets are already saturated. In addition to competing with existing startups, there is also competition from multi-industry conglomerates.
Whether it’s a B2B or B2C, every startup faces high competition in every phase including seed fundraising and market cap generation. As a result, they are forced to be more aggressive in the market and their strategies.
Lack of Consistency
Every business venture bears a strategic goal with expectations and startups are no different. A positive growth curve shouldn’t give a false sense of expectations. It's important to set realistic goals in the initial phase of any startup.
The initial growth won't be consistent if there is no sustainability. And this is where most startups fail. They fail to maintain consistency in their effort to ensure sustainability. There is no room for complacency and consistent effort is the only deciding factor.
Lack of Planning
A startup needs to have a business plan which would outline the expectable and inputs. While most startups have a business plan they often don’t include all the key areas. Many first-time entrepreneurs think that they will plan things as the business progresses but that’s a wrong move.
Key details like R&D, skilled staff, sales, funding should all get equal priority while planning. While faced with an issue, the target shouldn’t be damage control, rather there should be an appropriate plan of action to tackle every issue.
A startup needs manpower. You need to have a working team to run your business top to bottom. Whether it’s your employees or investors, you need to be careful about who you hire and who you get as your investor. Communication, team playing, and skills are important factors to be considered when it comes to hiring candidates. Hiring the right people can be a tricky task considering the sheer number of eligible candidates out there.
What you can do however is thoroughly assess their skillset and mentality. Cross-check whether these are the exact skills you are looking for and whether this can be a long-term partnership. Having an industry-related investor can be a huge advantage in this regard. They might be better qualified in assisting with the hiring process.
Startups are high-cost low revenue ventures in their initial days. Needless to say, the adjustment in this disparity comes from the investors. If you compare seed funding with venture funds, the amount might be small but it still tends to be a large sum. So naturally, there arises the need for financial management.
A startup constantly requires the investment of money until it reaches the growth and scaling phase. Many startups fail to make it to this stage because of a lack of management and cash burnout. In addition to having a business plan, it's important to have a strong financial model as well. Considering the limited resources and fierce competition, financial management is a crucial make-or-break aspect.
Suppose your startup has done everything right up until the growth phase. You can expect the customer base to increase rapidly with increased demand for the product or service. This naturally calls for scaling up. However, scaling up isn’t just about adding a few more employees.
You need to consider a lot of factors as you scale up. You need to formulate a strong HRD, look after your supply chain and product sourcing. In addition to that, there is the aspect of widening the distribution channel and revenue management.
Without proper handling, all of these might become too much to keep track of and the business would crumble even before taking off properly.
A startup isn’t a one-man thing. As a business grows, there will be a lot of decision-making needs that are honestly impossible for a single person to micromanage. However, many entrepreneurs think that micromanaging is the only way to ensure organizational growth. A micromanager often overlooks key decisions while focusing on lesser important ones. As a result, business growth is hampered.
As startups build teams, it's important to delegate tasks to the team. This not only enables a business to be more proficient, but the time utilization will help a business edge out its growth.
So far we have discussed some of the most common startup business challenges. While there might be a boom in startups in the world, managing these startups are no easy task. As an entrepreneur, you’ll have to put in a lot of effort. The room for mistakes and complacency is next to zero. Many startups fall victim to these common mistakes we outlined above. A startup should definitely focus on its priorities and end goals all the while preparing to face challenges head-on.