Startups have been an ongoing trend these days, with technology playing a vital role in their proliferation across the globe. However, there has been a cause for concern as the numbers don’t fall favorably on the entrepreneurs. In the U.S. alone, the rate of startups and small businesses being created are now lagging behind their rate of closures, according to a U.S. Census Bureau report. Of the 400,000 businesses that were set up, 470,000 have closed.
There is always a reason why businesses fail, more so for startup companies that dared to give it a shot armed merely with a superb idea. In most cases, they weren’t able to make it big due to the lack of preparation, with the whole gamut of operations being run into the ground by ill-equipped individuals.
Failure may be a huge setback when starting a business, but this shouldn’t discourage aspiring entrepreneurs who want to follow their dreams and venture out on their own. To boost the likelihood of success, they should come into it immensely prepared. In the immortal words of Louis Pasteur, ‘chance favors only the prepared mind.’
The key to making your preparation efforts to work is to identify each of the challenges that may hamper the growth of the startup business.
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Big Challenges Startups Must Prepare for
Building a Solid Team
A workforce consisting of a competitive, passionate, responsible and talented pool of individuals is the most basic foundation of a successful startup company. For this reason alone, your immediate goal is to hire and train the most effective people who are capable of taking bigger roles and can run the show with you as the business grows.
To bolster your team’s performance, all members should undergo training. This makes each of them more efficient in areas involving critical thinking, problem-solving, communication, collaboration, creativity, and innovation.
These are some of the most important reasons why you need to be careful in making hiring decisions. If you’ve got your hands full, don’t hesitate to ask for help and guidance from those who know better.
Cash Flow and Raising Funds
Your startup’s capital is the money needed to produce goods and services. It is required to purchase assets and maintain the operations of your business. This is also one (if not the most difficult) challenge a startup is going to face unless you’re lucky to have investors who have no issues sending a generous amount of money free-flowing your way.
Keep in mind your cash flow will fund your product development, office space, workforce salary and marketing. Cutting back on costs is not a smart idea since this will lead to the shedding of staff, quality compromise, and profit loss that will eventually spell doom for the company.
To address this, you must have a clear picture of the costs you will incur. Only then would you know how much money you’ll need to jumpstart your whole operations. If your product is good enough, you will be able to attract investors who are willing to provide the capital. But if your own funds aren’t enough, you can always apply for a loan.
You may be off to a good start if you have enough capital in your hands. But, that doesn’t mean you’re off the hook. As a leader, it’s going to be your job to manage both the time and money needed for your startup to progress without running out of either one of them.
Many startups are frequently taken by surprise when they achieve a considerable amount of success since they don’t have an adequate plan in case the opportunity to scale up presents itself. What happens is they drown in their attempts to cope with the changes and increasing consumer demand.
It is important to note that gaining too much profit combined with the suppressing external control in the early stages of your startup may instantly take away the joy of nurturing your young business. You will first need to have a scalable product and a cost-effective sales channel established before you can scale up your whole operations.
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Unless you’ve invented a product that’s the first of its kind, chances are you will have competition in an already crowded marketplace. Your rivals may have changed the playing field, so arming yourself with the right strategy with the ability to think on your feet and adapt to the changing industry environment will lead you to either success or failure.
Startups cannot afford to be under ineffective management from the get-go up. A team that has worked well in the early stages may find themselves in trouble as the startup grows or tested by every single challenge it encounters. The solution lies merely in a managerial team that can handle everything thrown at them.
Lack of Mentorship
Your idea or product may be remarkable, but without the necessary guidance from an experienced individual, you might not have what it takes to move far. This is where a mentor with extensive knowledge and market experience comes in. The wisdom and confidence you can learn from this guru of sorts can help you formulate effective strategies to clear those hurdles that may hinder your startup from growing.
Seek successful entrepreneurs and learn from the ways they have managed their companies to become top performers in their own industry. You won’t regret it.
Startups are expected to face tough challenges, but your passion for building a company that offers a product meant to help people can be a powerful driving force that can help you tackle them. Armed with the knowledge and technology to formulate the right strategies, you will be able to deal with these obstacles and steer your fledgling company to a brighter future.
This article is in partnership with Cashalo.
Venus is the Head of Editorial Content at Moneymax, with 15+ years of experience in digital marketing, corporate communications, PR, and journalism. She invests in stocks, mutual funds, VUL, and Pag-IBIG MP2. Outside of work, she’s crazy about cats and Korean dramas. Follow Venus on LinkedIn.