10 common challenges all startups face
- May 10, 2019
- Posted by: jamid
- Category: Business Consulting, Start-Up, Starting your own business
The term startup refers to the newly established companies that are run by an individual or a group of people and enter the market to fill a specific gap. Most of the startups are initially funded and sponsored. A startup aims to offer a new kind of product in the market. In some cases, startups aim to present better versions of already present products with some of their specifications, making them unique from the already existing companies. The beginning time of a startup is its hardest due to intense market competition, and the only aim is to get on some solid stance. Business is a vibrant field, and we can find so many brands selling the same kind of product in different forms. However, despite all this fact a study done by Harvard School of Business suggest that the rate of startup failure in the US companies is approximately 50% in the first five years and increases to 70% in a time of 10 years. There are several challenges that all startups face in the early phases among which 10 of most common are listed below.
1. Lack of Money
The most significant factor leading to startup failure is lack of financial resources to support the company. Even though most startups are initially funded and have investors by their side, still due to lack of experience and fierce competition in the market they are unable to back themselves. All businesses require sufficient financial support in the initial phases because lack of money can delay company progress and expansion. Moreover, more income also means more expenditures and unless the balance isn’t made timely and with planning all will be lost.
2. Poor Planning
Planning is highly essential in business. It gives you direction, sets goals and objectives and defines the methods and approach needed to acquire them. A proper trading plan is needed because it defines your behavior in the market. Lots of startups fail because they have no strategies regarding risk management and hence in the heat of the moment, they end up losing all their resources.
3. Intense Competition
For a startup to survive the market environment, it must in all circumstances overcome the pressure of other companies striving to achieve the same goal as them. The reason startups fail very quickly when they enter the market is because every company aims to take the most significant share of profit for themselves and a necessary aggressive attitude is required to survive the competition.
4. Acquiring an Efficient Team
In the beginning when resources are less, and startups can’t afford any form of mistakes they require highly intellectual team members. Credibility is a great concern for companies, and if a startup fails to accomplish their tasks, they end up losing their clients and customers and the only way to prevent that is to have experienced professionals in the team who can fulfill their purposes and maintain high dependability at the same time.
5. Earning Customer Trust
The number of customers defines startups progress. Startups, initially when going through fierce competition and financial concern tend to neglect this aspect of the business. They fail to attract customers. It is a simple rule no matter how good your product is if you are unable to present it in an excellent way to your customers you will eventually fail. Understanding customer requirements are highly critical to earning customer trust and loyalty.
6. Lack of a Mentor
Simply having a great product or service won’t be enough to grab a sustainable market share. If a startup lacks in market experience and knowledge, having a mentor is imperative. The mentor would help the startup clear these roadblocks and help them strategize better. According to a recent study, 33% of entrepreneurs mentored by successful businessmen went on to be top performers. Hence, having somebody to lean on for important decisions is quite crucial.
The only way people will become aware of a product is via advertisement. This is a great challenge in the initial phases. Most of the well-developed companies spend approximately more than 70% on their advertisement and the remaining 30% on their other concerns. This is, in fact, the only way the public will become aware of the services and products the startup is providing. Since advertisement is costly and the budget is limited, there is a high chance the startup will face difficulty in this area.
8. Time Management
In the initial phases, the biggest challenge is time. So many decisions must be made regarding the company’s future and progress, the hiring of employees, advertisement, etc. Moreover, there is intense competition simultaneously going on and managing time efficiently is the necessary step towards success. This can be achieved by minimising distractions, executing tasks according to plan and most of all having a proficient and dedicated team.
9. Lack of Guidance
Many startups fail because when they enter the market, they are unaware of the market trends. They have no previous experience in business and lack a proper sense of direction. They have to figure out everything by themselves and through experience which also means setbacks as well unless they’re lucky enough to have proper mentorship support from experienced people besides them. According to Rhett Morris of Endeavor Insight, approximately 33% of the successful founders of tech firms were mentored and guided by highly successful entrepreneurs, and later they came to be the trendsetters of the market.
10. Understanding the Market Trends
A common challenge all young startups have to face is making themselves familiar with the trends of the market. In many business areas like forex trade the market trends are continuously fluctuating and are affected by even the very smallest of the news, there is a severe risk, and the probability of startups failing is very high. It is just like in case of major companies that fall overnight due to changing in the scales. And since most of the startups today have some form of foreign trade, they are for sure affected by the changing exchanging rates. Hence figuring out how to survive in the harsh environment is a great struggle for startups.
A famous saying no pain, no gain. In short, to make the startup successful and make tremendous progress, all these challenges must be faced, and the only way through them is working with high efficiency and a great deal of dedication and the chance of making mistakes or showing ignorance should be none.