Roadblocks and challenges faced by startup entrepreneurs

By | May 13, 2015


Gone are the days when everyone wanted to work in an IT company soon after their graduation. Currently, we are living in a startup era where everyone want to start and run a startup company. Trend of quitting an IT job to start an own company is picking up. When so many start it on their own, it may look very simple to start one. But that is not the actual case. It is not all that simple to start a business and run it successfully. It requires a lot of work, planning and lot more. Also, various challenges cross the paths which has to be overcome to make the business steady and more productive. Some most significant challenges that startups grapple are listed below:

startup challenges

1.Startup Funding:

Every day we may come various news on how different startups received funding from various investors. The news may look like it is easy to get funding. But it is important to know that those companies are only 1/6th of the total startups and rest are still fighting to get funding for their company. Funding is a major challenge for any startup or small-scale business. Getting the right investor is a task. Getting to know them and then convincing that the business model is a good and effective one is not all that easy. Situation of the economy to play a major role. When an economy is flourishing, the cash flow would be more and would be slightly easier to pull in cash but the case would be just opposite if the economy is bad. Credit today from money lenders or from banks is tight and no one would ever know when we would get the amount in hand or we may even end up not getting a penny.

Also, it is common for the investors to give a small initial investment during the early days to know if the business is capable of making money. The investing technology firm have also raised the bar in the terms of ensuring that the entrepreneurs do enough legwork before pitching into their companies, said venture capitalist Jeffrey Bussgang in Inc.com. One should just understand cash is the king.

2. Recruiting wrong individuals:



Finding and setting up the right team who share the same enthusiasm and passion for the founders and other critical department of the business in another difficult part. Staffing is another tricky area especially during the early phases of the business as every member joining the company would be crucial to the company’s performance and development. The problem can arise in identifying the right individuals or not having enough capital to attract talented and potential candidates. If the right people are not picked for the company, then even if there is sufficient funding or abundant other resources it would only prove to be futile.

3. Setting up right culture:

In a survey by Mercer Culture Integration Snapshot, more than 75% of the ambitious organizations consider work culture as a key component in creating deal value. Having a strong culture may not assure success of the business but ignoring it may affect a business’s chance for long-term sustainability. It is not something you can see every day or something that can be spotted on annual report or balance sheet, it is a feeling that has to be imbibed in all and acts as a glue to hold the firm together.

It is ok for the companies to refer to other company’s culture statement but it has to prepared by its own company looking at the business model and the structure. Work culture would help the company to be more systematic and more organized. There would be no loose stands hanging of a well cultured organization. The culture has to be consistent throughout. But it is not all that easy to create a culture, it demands a lot of planning and effective leadership. When there is no well-defined work culture in the company, the end date is not very far.

4. Misunderstanding market:



The way the apps are flooding into the market may make one think almost everyone has new business ideas these days. But it has to be understood that not every idea has a market. Many owners have really good business ideasĀ  but may overestimate the size and the potential of the market or may not have a clear understanding of what a business really needs. Either way, if the business does make a product that a customer is willing to buy, the business would have nowhere to go.

No matter whether the business in based on service or manufacturing or retailing or anything else, there should be crystal clear understanding of the industry inside and out. It is very important to know the participants of the industry, distribution patterns and competition and buying patterns. Knowing the industry well will help one decide the company’s niche. Getting a clear picture of the industry would take time but it is not a step to be skipped before starting a business.

5. Cash Flow Problems:

It is a normal tendency of any new businessman to make bad assumptions of cash. The bad assumptions can range from instant profitability, fixing wrong price for the product or buying things that are not needed for the business could give way to cash flow problems. Poor cash flow management is one of the common stumbling block for entrepreneurs. According to Dunn & Bradstreet, 90% of the small-businesses fail because of poor cash flow.

Maintaining certain reverence for cash would help the organization maintaining good cash flow of the business. Understanding every inflow and outflow of cash and never delegating this function means good cash-flow management. Cash flow statement is very important to know the financial health of the statement. Proper way has to be adopted to understand the cash flow of the business and every aspect has to be observed minutely. Failing to do so would not let an entrepreneur know what is happening to the money coming into the business and can ensure the death date of the business in nearing.

6. Execution:

People who have an idea in hand and want to start a company, should understand that million dollar idea alone is not enough to start and run a business successfully. It is all about the execution, and investors invest in the people who can execute or history of successful execution. Execution is nothing but making ideas work and for startups it usually means making change happen, which is even more difficult. Focusing on the smart execution in the core no matter how awesome the idea is.



Vanessa Colella, managing director and global head of Citi Ventures says, “That’s now the thing (execution) that differentiates people who are great and successful from people who are really smart and couldn’t make it.” Time and the situation matter while executing a process or a n idea for the business. For instance, Uber’s idea is really great but it cannot survive in a place with no roads or in a village where people are not aware of the technology. Thus, executing the idea right has a huge stand for the business.

7. Unrealistic expectation:

The future plans or the business projections are not always mentioned on the excel sheet. If the person is able to put in down, then it is great but make sure the expectations are realistic and practical. It is always better to think of the best case scenario and the worst case scenario for any process to be prepared for both. Agreeing to the realistic goals is the first lesson a fledging business should know. Setting goals like making $20 million revenue in the first annual year would not be possible for a $2 million worth company. The common goals for the company is revenue, profit, sales volume and growth goals. Unrealistic goals or expectations on the company would lead to catastrophic results on the company. It is common to set unrealistic goals by the overenthusiastic entrepreneurs which would only give way to the failure of the business.

8. Unable to Balance Quality and Growth:

Even if the company seems to be going fine initially, there comes a time when the issues from growth seems to match or even outweigh the benefits. Whether the company deals with service or product, at some point an organization must sacrifice in order to grow up. When the company grows the owner may not be able to attend to all the company needs. But unfortunately, that level of personal management and that eye for details may make the business not very successful. Many businessmen often find themselves in a gap between wanting to grow and an unhealthy obsession with quality. It is in the hands of the entrepreneur to balance quality and growth without affecting the rise of the company and also without disturbing the brand of the company.

9. Client Dependence:

When there is a customer who contributes to a major part of the income, it is normal to act like an independent contractor rather than a business owner. It also means the owner would be more stuck with that main customer. Diversifying the customer base is key for any growing business which could be a problem when the client does not bother the business with late payments or orders. It is definitely a boon to have such customers. But it is not good for business for it can handicap the business on long-term. In any situation, if the client wants a change and move to another company or if the company gets dried out serving for the wants of the customer, it would affect the company on the whole. So it safer and better for business to have a diversified and varied clientage base to get the business moving even when a single customer does not pay or cheat the company.

10. Not marketing the product/company right:

Startups often consider their success in terms of just products and markets, they fall short to realize the importance of marketing their product to the target clients. It has to be made clear that marketing does not just mean ‘making ads,’ it is about introducing new products of the company to the people when and where they are most receptive. Some say sales is more important than marketing. But it is not the thing, marketing the product right is the not only take the startup and its products to success but would also guide the sales team. So it is not conflicting concepts rather it is more of complementing concepts.

This marketing concept is one the biggest challenge that most of the recent tech startups face. The company can hire an expert market analyst and strategist to market the company right in the market or it can look out for help from an external ad agency to structure the company’s marketing plans. The external agencies with the experience of working for different companies would be able to guide and help the companies better. Without marketing the new company, the potential customers would not even know such a company or products exist in the market.