Starting your own business is not nearly as intimidating as some people may believe it to be. After all, about 97 percent of Australian startups have less than 19 employees (some have as few as 3 or 4). These teams aren’t hard to run efficiently and the organization itself isn’t hard to manage. However, even with this on your side, there are so many enterprises that fail every single year. Why? Well, because the majority of these startups aren’t ready to face the startup challenges of the business world and overcome them efficiently. Here are 10 such challenges, as well as a couple of tips to help you deal with them.
1. No market need
The main reason why 42 percent of all enterprises fail is due to the fact that there’s no market need for the product that they’re selling or the service that they’re providing. There are a couple of solutions here but your best bet lies in identifying this before you launch. Otherwise, you may need to pivot or diversify your offer. Keep in mind, however, that just because there’s no market need, at the moment, this doesn’t mean that there won’t be one in the future.
2. Running out of cash
One of the most critical startup challenges that you may encounter is the cash flow problems. This usually comes from unexpected expenses, the fact that business is not profitable (in its early stages), while you still have to cover the overhead. Fortunately, there are many exciting solutions that you could opt for in order to resolve this issue. For instance, you could apply for an additional loan. You could also sell your invoices or open a business line of credit.
3. Inadequate team
When making a team, you need to understand that performance and resume are not everything. On paper, a person could perform admirably, however, if the person in question is a backstabber, a rival or a self-proclaimed star, chances are that they’re more trouble than they’re worth. You see, there are some types of people who can ruin your business quite effortlessly, and you, as an entrepreneur, need to learn how to avoid them like the plague.
4. Getting outcompeted
Sometimes it’s not about what you’ve got but about what the competition is like. For instance, imagine a scenario where you wanted to enter the soft drinks industry and your first objective was to surpass Coca-Cola. Of course, the situation is usually not so extreme but encountering a too tough of competition can be just as devastating. In order to get through this, you might want to pick a niche instead of aiming for the whole industry and casting your net too wide.
5. Managing your finances
Another issue that you need to address is one of your finances. Namely, your income needs to be greater than your outflows in order for your company to create a profit, however, a simple surplus is not enough. What you also need is the assessment of your breakeven point, a nearly done tax report and a chance to tap into all the tax benefits that you have available. The biggest problem lies in the fact that first-time entrepreneurs usually leave so much of this tax money unclaimed. In order to avoid this problem, you might want to consider reaching out to a professional tax accountant in Sydney.
6. Product not user-friendly enough
One of the startup challenges you need to understand is that you shouldn’t focus on the features exclusively. Sometimes, user-friendliness is far more relevant. Why? Well, because it gives you a much larger target audience. Moreover, it improves the overall customer satisfaction, seeing as how there’s no annoying learning curve that you have to master in order to efficiently use the product in question. Sometimes, it’s even worth sacrificing some of the product’s functionality in order to keep the product as simple and user-friendly as possible.
7. Wrong pricing strategy
It’s not about what the product is worth, it’s what you can price it in order to remain competitive and reach the maximum profit. In general, there are a couple of directions that you could take here. First, you could decide to go for a competitive price to penetrate the market. Once you establish a strong presence and gain some authority, you can then increase the price to maximize profits. You could also start with the high price and then lower it gradually until you milk every single customer purchasing power demographic.
8. Inefficient marketing
Perhaps the single biggest reason why so many startups fail is that they don’t know how to handle their marketing startup challenges. In order to avoid this problem, you might want to outsource your marketing to a more professional team. Also, you can’t afford to focus exclusively on online marketing, which is something that a lot of entrepreneurs do nowadays. Go for promotional products and old-school advertising (newspapers, radio, television), as well.
9. Mistiming a product
Sometimes, you can mistime your product, thus landing yourself in a lot more trouble than you had to face originally. The perfect example of how this works can be seen through the story of the unfortunate release of a cult-classic video game Vampire: The Masquerade – Bloodlines. While the game itself was quite brilliant, it was A) released too early and B) released on the wrong date. In other words, the game was unfinished and it was released on the same day as another, far more popular, cult-classic Half-Life 2. Needless to say, this is not something that’s exclusive to the video gaming industry.
10. Ignoring your customers
The product that you’re selling is made specifically for your customers and if you ignore their feedback, your product and business won’t be able to evolve. You see, this is the point of alpha and beta testing, to begin with. You provide an almost-finished product to your customer base and wait for their feedback. However, your job is not done after the release of the product, especially if the product in question is software.
Unfortunately, the list of potential challenges that you might face doesn’t end here. You might succeed where all the others fail and then fail where no one else has failed before. Nonetheless, just because you can’t foresee every difficulty that your enterprise might encounter, this doesn’t mean that you can’t be prepared for some of the most likely startup challenges on your path.