Many of you might have dreamed of running your own business empire one day. And maybe you already own a new business. But building a sustainable business grounds up is not a cakewalk. You will face many challenges and roadblocks on the way. You sometimes feel like you have no weapon left in your armor to fight them. This article is intended to solve that problem.
I will take you through the top 7 most common challenges faced while setting up a new business, and how to overcome those.
The challenges are very obvious. You might already know them. But the main focus of this piece of writing will be to help you get going with your business by overcoming these challenges. I will also list down relevant resources for your further reading on each of the topics.
You need funds to start any business. Unless you are a millionaire, you will exhaust your self funding reserves after a certain time. Or you do not want to fund the business yourself at all. In either of these cases, you need to know how and where to find investors for your business. You also need to ensure that the investor is the right fit to your business and vision.
How to find funding:
Following are a few ways in which you can find funding:
- Crowdfunding: Try popular crowdfunding platforms like Kickstarter, Indiegogo, Crowdfunder, Fundable etc. You might also want to explore any similar platforms popular in your country.
- Angel investors: They are wealthy individuals who invest in businesses in exchange of equity. They also provide you advice and guidance to run your business.
- Venture capitalists: They usually invest large amounts of money and in return they tend to demand large share of equity.
- Bank loans and Small Business Administration (SBA) loans: You could apply for loan from a bank or a governmental body (SBA).
You need to figure out what’s the right funding source for you, depending on the nature of your business, vision, short term & long term goals etc. Given below are a few resources that can guide you further on finding the right funding for your business.Click to enlighten your network with this piece of knowledgeClick To Tweet
- 10 Tips to Make Your Crowdfunding Campaign a Success
- 9 steps to finding angel investors for your business
- 10 Tips for Finding Venture Funding
- What Is An SBA Loan And How Do You Get One?
2. Hiring the right people
People are core to the success of any business, especially a new one. When you start off, you will most probably be having a flat structure with little control mechanisms. And you would want every person in your organization – be it a co founder or an employee – to feel a sense of ownership and commitment towards the business. Hence, collaboration and cooperation among the employees matter a lot.
But how do you make sure you bring in the right set of people?
While hiring, you need to evaluate employee fit at three levels – professional fit, personal fit and cultural fit
- Professional fit: Here you measure the skills and abilities of the candidate and see if they match with your requirements.
- Personal fit: This evaluates how good the person is to work with diverse set of people and environments.
- Cultural fit: This is the most important factor when your goal is to build a team of people to develop a growing and sustainable business. Make sure the candidate values your vision, culture and way of working, and is ready to work towards them.
A candidate who fits well into all the above three, will be the right employee for your business.
3. Budgeting and managing cash flow
Even with a proper budgeting plan in place, you sometimes struggle to pay your bills. Being a newbie, some buyers tend to exploit by delaying their payments. At the same time, your suppliers might not give you the flexibility to postpone payments to them. This can accumulate over time and start to seriously affect your operations.
How to overcome this?
When you try to build a business from ground zero, every penny counts. The art of cash flow management lies in balancing inflow and outflow. There are a few ways in which you can ensure you have enough cash at hand:
- Minimum order quantity and down payment: Whether you are in B2B or B2C, you have distributors or customers who would buy your product or service in bulk from you. In such a scenario, set a minimum order quantity and mandate a percentage of the total value as advance payment. You can also ask for payments in phases instead of a lump sum at the end.
- Proper invoicing policy: You can establish a company policy on invoicing. Leave a maximum of 15 to 20 days period for invoicing. You may also attach a penalty for delayed payments. You can also request your suppliers for a larger payment period.
- Cost cutting measures: This is more of an expense management than cash flow management. But, given that in a small business, a lot of transactions are cash based, cost optimization can help bring down outflow of cash significantly.
If your products and services have demand, your buyers and suppliers would definitely accept these conditions. Give these a try. You will start finding positive results in a few weeks time.
4. Doing it all by yourself
In a startup, mostly you do not have a dedicated person for all roles and responsibilities. You will have to do everything from clerical work to business strategy planning. It doesn’t end there. You also need to take care of IT, finance, advertising & promotion etc. You cannot possibly be an expert in everything.
It is also possible that you cannot afford to put time into every activity in your business. And you obviously want to find a balance between your work and life.
So how do you ensure all the functions of your business run smoothly with limited time and number of people? Following are a few ways in which you can achieve this:
- Stay organized and stick to your routine: To manage your time well, organize your day by properly scheduling the list of activities you need to complete. And dedicate some time to your hobbies and family in your everyday routine.
- Hire founders/employees with complementing skillsets: Let’s say you are good at sales & marketing, but not operations & finance. Then you should find a founding partner or employees who have experience and exposure in finance and ops, and vice versa.
- Training: Continuous learning is a must for an entrepreneur. And training and certifications are an effective way to learn new things.
- Consulting and contracting: This refers to hiring a third party consultant or contractor who is an expert in the areas you are not good at.
- Mentorship: You can take guidance from mentors who give advice on business related topics. There are many governmental bodies and incubation centers who provide mentorship services for free. We will talk about this in detail in a later section.
So if you find it challenging to manage any aspect of your business, don’t get bogged down. Every successful entrepreneur out there has gone through the same. With the steps mentioned above, you should also be able to overcome these hurdles.
5. Staying motivated
Setting up and running a new business is like running against the wind. You have to beat the odds to succeed. And definitely you are taking a risk. With a lot of these adverse factors, you might find it difficult to stay motivated at some point or the other. You need to keep your energy levels high to keep yourself going.
How to stay motivated
One of the best ways to stay motivated is to enjoy the journey. See every action of yours as a step to future success. Also don’t make your work monotonous. Bring in an element of variety and diversity to your everyday work. You could drive inspiration from those entrepreneurs who made it big. Also, don’t hesitate to talk about your business vision to your friends and relatives. That will help improve self confidence in your idea. Given below are a few relevant resources for you to learn how to stay motivated while you work hard to make your dream come true.
- 8 Ways for Entrepreneurs to Stay Motivated
- 5 tips for entrepreneurs to stay motivated
- Feel like Giving Up? 16 Way to Help Entrepreneurs Stay Motivated
6. Lack of planning and guidance
You cannot wait till you become a master of all elements of business to start one on your own. And hence, there will be some guidance, direction and mentorship you need to set yourself in the right path. But you cannot go around and randomly ask people for guidance. You need to have the right people at the right time to help you out.
How to find guidance and mentorship
If you already know people who provide advice on entrepreneurship, nothing better. Try to leverage them. But certainly there are more ways to find experts who can guide you in the right direction:
- Accelerators and Incubators: Government bodies, entrepreneur chapters and management institutes run startup incubation centers to support entrepreneurs to build and develop their business. A good idea is too look for such entities in your country who support similar businesses. Stanford StartXand Capital Factory are examples of incubation centers.
- Entrepreneur networks: Most of the major cities around the world have networks for entrepreneurs which hosts events and programs to support budding businesses. Try to find the ones in your city and you should be able to find an expert in your field, or somebody who has traveled the same path. London Entrepreneurs Network and New York Entrepreneurs & Startup Network (NYESN) are examples for such networks.
- Social networking sites: This is probably the easiest and fastest way to find mentors. Professional networks like LinkedIn, and even other social media like Facebook and Twitter are platforms where you can connect with professionals and groups of people who provide business advice.
Above are the major sources of finding experts, professionals and mentors for your business. Following are a couple of relevant articles which talk about a few more methods to do this.
- 10 Places to Find Mentors and Advisors for Entrepreneurs
- How Startups Can Find The ‘Yoda’ Of Mentors
7. Scaling your business
You have setup your business, stabilized the operations and have sold your products or services for a few months. Now you want to take it to the next level by increasing your customer base, production capacity, market penetration etc.
The first step is to have the end goal in mind. What’s your vision for the business? What markets do you plan to enter? How do you plan to scale up your manufacturing? You need to ask these questions yourself to figure out what you need to do to achieve these goals.
The second step is to learn how to get to the scale you want. Tim suggests 3 methods for this – bootstrapping (proving your idea by testing it or by something like crowdfunding), strategic advice (advice from experts) and outside investors (finding a venture capitalist or PE firm to invest in your business).
Third step is to creatively manage your cash flow. We have already covered this in the budgeting and managing cash flow section. However, Tim also suggests to create new revenue streams to augment your existing cash flow sources.
So if you are an entrepreneur who is striving to make a mark, gear up with all the suggestions in this article and additional resources I listed. Be prepared to face your challenges with courage and commitment. You shall develop your small company into a flourishing business soon.
Please share your views and opinions in the comment section. Also feel free to shoot any queries you have.