Life as a startup owner is tough. From day one, you face unexpected challenges. Challenges which define the future course of your business.
Most of the times, startup owners struggle to identify challenges in their startup. One of the reasons for this oversight is the busy schedule startup owners suddenly find them in. Another prominent reason is the lack of experience in identifying these challenges.
As per a study by Small Biz Trends, 30% of small businesses fail because of unbalanced or lack of managerial experience of founders, and that is the problem with startup and small business founders. Majority of them have none business or managerial experience.
When we started, we too were a part of this majority but we were lucky to survive. During my initial entrepreneurship days, we could not identify the financial challenges faced by our startup. One of the glaring examples of our failure was identifying the need for a proper billing cycle with clients. Our cash flow was a mess.
We looked at our finances on a weekly basis but never looked at it from a financial planning perspective. By the time we identified the challenges, we were deep down in debt and then came the tough part – How do you resolve the challenge?
Identifying a challenge is one thing and resolving it is another. Resolving or finding a solution to a challenge is an art. An art you learn with experience. Unfortunately, working professionals and college students are today’s entrepreneurs. None of them falls in the category of “experienced entrepreneurs”.
Based on my experience as an entrepreneur, I have compiled a list of common challenges small businesses and startups face. The list will help them identify these common challenges and find a solution to resolve them.
Perfectionism is what all startups aim for. They want to develop a product that is the best in the market. Now, the best product in the market comes with the best set of features and should out-compete the best competitor.
So, how do you define “the best product”?
Is it a product that has the best features or is it the product which provides a value for money or is it a product that is a mix of both?
Rarely do we see startup founders find a balance between the right set of features and the best price to sell in the market. They struggle to find that middle ground. The biggest challenge I see here for every startup is to identify whether their product is a right fit for the market or not.
As per a recent study (conducted between 2014 to 2018), 42% of startups closed because they could not create a demand for their product.
How do you overcome the challenge of building “a perfect product”?
The solution to this challenge is product validation. It involves analyzing the problems faced by the industry before starting the business. It also involves research on reasons customers will trust your product to deliver solutions. The exercise also helps in testing whether you have enough funds to monetize high-quality products.
Around 8 years back, I worked as a consultant for a job portal helping them design their business strategy. One mistake we did in the startup was: no product validation. We lived in our own fancy world where we designed the product as per our whims and fancies. We even priced the product based on our understanding of the market. An understanding we gained by looking at our competitors and speaking to a few customers.
Most startup entrepreneurs rush into developing an idea without validating and understanding the requirements needed for a successful product. And that’s a blunder. Sorry, it’s not a blunder – it is a disaster. A disaster that can sink the startup.
So, here is a simple advice: it is a challenge to grow a startup without identifying the product’s market need. And, how do you do that?
Product validation is the key.
Last year, I worked with a startup in USA as their development partner. They were building “the next big thing” for the construction industry. A SaaS Solution which was to change the way, their industry worked. Here is what happened…
They exhausted all their budget in development of the product. Repeatedly, they would pivot. By the time they reached a stage of marketing the product, they ran out of cash to market the product.
One of the key takeaways from my discussion with them was that they had an initial set of customers and hoped that their product will soon have more sales using word-of-mouth publicity.
As a new entrepreneur, it is vital to understand that you need to save money specifically for marketing and every penny of the allocated marketing budget should be spent wisely. Until and unless the product rightly goes to the market, there will be no sales. No sales means no business. No business means no cash. No cash flow means the startup will have no money to bill, thereby, leading to its closure.
According to a study by CB insights on 50 startups, lack of a marketing strategy led to the failure of 42% of startups surveyed by them. The ‘build it and they will come’ approach is not the right way to go for startups. As an entrepreneur, you must have the right market strategy backed by the right funding (a substantial amount) to market your product and service.
When it comes to hiring the right talent, startups have it tough. The best talent is out of the budget and the rest needs a lot of training. Your startup may face challenges because you are working with wrong people. As a startup, you must use the right people to grow your startup.
Employees who have the zeal to learn new things and work in a very challenging environment are the ones who should be a part of your team.
From raising funds to controlling expenses to saving enough to survive the next quarter, there are financial challenges galore for any startup.
Finance is the backbone of any organization. Without money, there is nothing that an organization can do. One bad financial move, and the startup is looking at a big hole in their savings.
“To be, or not to be, that is the question.”
Startup owners are learning as the company grows, which put them in a very difficult situation. They too are learners and learners make mistakes. Mistakes that can cost them a lot.
Startups need leaders who take proper decisions. However, finding leaders who take proper decisions in startups is easier said than done. A simple mistake in decision making can have an adverse impact on the growth of a startup.
“When lack of structure fails, it fails all at once. What works totally fine from 0-20 employees, is disastrous at 30.” – Sam Altman
I don’t know why startups don’t consider lack of structure as a common challenge. Most of the startups face this challenge because there are too many things happening at a single time with too less a team. And it is understandable to not have a structure initially to facilitate faster decision making.
The problem starts when the startup grows.
Now, you need a proper structure where accountability is clearly defined. Trust me, startups struggle a lot during this transition.
As a startup entrepreneur, aim for a bigger vision from day one and the vision is to build a structure in your company – a structure that includes leadership and focused employees.
Facing a challenge in a startup is a part of day-to-day operations. The skill set of entrepreneurs is tested every single minute while working for their startup. How they face the challenges is what defines them and their business. It is the ultimate test of character and skill set of entrepreneurs.