You think running a business is tough? Wait till you open company from scratch. To give you a better idea about what this encompasses, here is a list of the top 10 challenges of starting a new business and how you can deal with them.
Challenge #1: Deciding on a feasible business idea
According to consulting experts from LawsTrust the biggest challenges entrepreneurs face when trying to open companies from scratch is deciding a business concept that can actually make money. Even if you’re able to handle the other difficulties listed below, having an unprofitable concept will eventually lead to the business’ failure. Because of this, you should choose your concept wisely and determine if there is a market for it.
This is done by conducting a comprehensive market study, which would encompass areas such as demand for your product/service; how the product/service is positioned in the market; competition in the planned location; potential conflicts with legal requirements; market trends; and estimated costs needed for the start-up. If you establish that the concept is viable, that’s when you push through with your business idea.
Challenge #2: Raising funds
Corporatemomentum.com.au a Management consulting in Brisbane revealed that Looking for a way to raise capital is perhaps one of the most challenging hurdles in starting a new business. Unless you’re already flushed with cash, you need to try several avenues like bank loans, bootstrapping, angel investors, credit cards, a second mortgage, crowdfunding (e.g. Kickstarter), microfinancing, or even a business partner.
The difficulty in raising capital usually comes from the need to convince finance institutions/investors to lend you the money/finance your business. Naturally, institutions/investors want to minimise their risk and would rather lend/invest in something that’s already more established.
That’s where the need to write a business plan comes in: by covering all the important details, you will be able to persuade institutions/investors to provide you the funds you need.
Challenge #3: Putting together your core management team
You may be the brains of the entire operation, but always remember that you can’t run your business by yourself; you’ll need help from a trusted team of legal consultants and managers who will help oversee your new company. Your main challenge is to piece together the right combination of people around you.
Since you’ll be depending on your management team on matters that you’re not knowledgeable about, here are the key attributes you need to look for:
- The team member should have skills that you don’t have.
- The team member should also believe in your vision for the business.
Challenge #4: Looking for a suitable location
The success of your new business is largely dependent on its location so you have to choose wisely. Looking for a suitable place, however, isn’t easy; you’ll have to consider a staggering number of factors such as:
- Accessibility to customers
- Visibility to passing traffic
- Image projected
- Proximity to suppliers
- Number of qualified employees in the area
- Ability to accommodate expansion
- Parking space
- Existing utilities
- Safety in the area
- Your layout needs
- Zoning restrictions
- And arguably the most important of all: affordability.
The important thing to remember is that you have to do your research. To get more insight, consult the local council and talk to business owners in your prospective areas.
Challenge #5: Recruiting the right staff
Employees are the most valuable resource that a company has. Their role becomes even more important in start-ups as staff performance will determine whether the company succeeds or fails. For your business to survive, you must recruit the right people. Here are several aspects you should take into account:
As things can become quite challenging for start-ups, the outlook of individual candidates matter. Aptitude also counts, but if you’re choosing among applicants that meet your minimum threshold of ability, go for attitude because this will affect other employees, especially when you’re not looking.
- Previous start-up/small business experience
Working at a small business or start-up requires people to wear different hats. This ability is key because your people would have to take on a number of different responsibilities that may change, depending on the situation.
- Social media presence
Being active in social media means the candidate knows his or her way around the internet. You can also use this connectedness to help promote your company online. Just remember to read each candidate’s last 50 posts/tweets to peek into how they behave.
- Previous tenure of at least two years
Avoid getting candidates who bounce between companies after every few months; this would cost you money. Look for people with a track record for staying at least two years. Anything shorter is too early; those staying over five years means they’re pretty much settled.
Challenge #6: Dealing with the competition
Unless you have a monopoly (which is highly unlikely), you’ll have to deal with your competitors. What makes this a challenge is that your business rivals are more established than you are. This, however, doesn’t mean that you can’t learn from them.
The first step is to identify your competitors. This would essentially be any company that provides a similar products or services that can directly affect your sales. Next, you have to assess your competitors individually, preferably through a SWOT (strengths, weaknesses, opportunities, and threats) analysis.
By knowing more about your competition, you can adjust your strategy and make the necessary plans to improve your standing in the market.
Challenge #7: Promoting your business
Your business is new so aside from friends and family, no one really knows it. To remedy this obscurity, you need to market your business. If you already prepared a business plan (which usually comes with a marketing plan), then all you have to do is to put your strategies into action. If you still don’t have one, then you should get cracking (here are a couple of resources on how to create a marketing plan).
Marketing strategies usually involve networking with others, generating buzz in social media, getting referrals, advertisements, and giveaways. Take note, however, that your approach should depend on your type of business and what media are more effective for your market.
Challenge #8: Keeping pace with trends and changes
If there is one thing that’s surely constant other than death and taxes, it’s a change. Whatever the state of your industry, it will surely evolve as time passes, making it a necessity for any business to stay on top of the trends or risk becoming irrelevant. The newspaper and printing industries, for instance, were significantly affected by computerization and the massive push towards digital.
On the other hand, you should also know how to tell the difference between major trends and short-lived fads. Trying to stay current on every craze could be expensive for your startup.
Challenge #9: Unanticipated problems
Encountering problems in business is normal. With careful planning and execution, you’ll be able to navigate your way through them with your start-up intact, and perhaps even stronger. What you should be concerned about are the unanticipated complications that can take on many shapes including (but are not limited to) the following:
- Government policy changes
- Lawsuits from patent trolls
- Cash flow issues
- Diminishing capital
- Increase in overhead
- Hidden costs (e.g. surety bonds, licensing fees)
- Declining sales
The best way to handle such problems is to anticipate as many as you can when planning with your management team, devise ways on how to circumvent these issues, and design measures to address them in case they occur.
Challenge #10: Managing your time
Being in the start-up phase is a crucial time for any business. There are always so many tasks to do, and they all seem important! Even with a management team, you’ll probably find yourself feeling like you’re spread too thin at times. This is why it’s important for you to manage your time better. Here are a few tips:
- Plan your day beforehand.
- Use a calendar and always bring it with you.
- Allot time for interruptions; they always happen.
- Allocate buffer time.
- Assign a time limit or deadline for every task.
- Learn how to say no (without burning bridges, of course).
- Aim to finish tasks early instead of on time.
- Block all distractions, especially when you need to focus on important work. Switch off your phone if you have to, or at least put it on silent and deactivate internet access.
- Do similar tasks together.