Challenges faced by Startups
Some of the major issues and challenges are discussed below:
- Financial resources
Availability of finance is critical for the startups and is always a problem to get sufficient amounts. A number of finance options ranging from family members, friends, loans, grants, angel funding, venture capitalists, crowd funding etc are available. The requirement starts increasing as the business progresses. Scaling of business requires timely infusion of capital. Proper cash management is critical for the success of the startups (Skok, 2016; Pandita, 2017). A recent report paints a gloomy picture with 85% of new company’s reportedly underfunded indicating potential failure (Iwasiuk, 2016).
- Revenue generation
Several startups fail due to poor revenue generation as the business grows. As the operations increase, expenses grow with reduced revenues forcing startups to concentrate on the funding aspect, thus, diluting the focus on the fundamentals of business. Hence, revenue generation is critical, warranting efficient management of burn rate which in common parlance is the rate at which startups spend money in the initial stages. The challenge is not to generate enough capital but also to expand and sustain the growth.
- Team members
Startups normally start with a team consisting of trusted members with complementary skill sets. Usually, each member is specialized in a specific area of operations. Assembling a good team is the first major requirement, failure to have one sometimes could break the startup (Skok, 2016).
- Supporting infrastructure
There are a number of support mechanisms that play a significant role in the lifecycle of startups which include incubators, science and technology parks, business development centers etc. Lack of access to such support mechanisms increases the risk of failure.
- Creating awareness in markets
Startups fail due to lack of attention to limitations in the markets. The environment for a startup is usually more difficult than for an established firm due to uniqueness of the product. The situation is more difficult for a new product as the startup has to build everything from scratch.
- Winning the trust of customers
For any business, the ultimate challenge is to strike a chord with its target audience and win their trust. If you wish to cement your position in the marketplace, it is absolutely essential to have a highly satisfied and loyal customer base. Try coming up with customer-friendly policies and work towards providing top-notch services and customer experience. It could be hard initially, but with regular feedback from them, you can understand their needs. This information is helpful to create a strategy that aligns with your vision and their interests.
- Lack of planning and visualizing
Planning is an essential component of startup culture. It is surprising how lightly people take it and forget to cover important things like budget, resources, and potential risks as a part of their business plan. As a result, they falter and fail. Create a detailed plan and include every little thing, so that your startup doesn’t come to a standstill when something goes unexpectedly.