If you have just started a new business or are thinking of doing so, there are always going to be challenges to overcome. Fortunately, many people have been there before and have shared their wisdom.
Let’s take a closer look at 5 common problems new businesses face and how they might be solved.
1. Poor Market Research
All businesses start with an idea. You may think it’s the greatest thing in the world and your friends and family might agree, but if ‘the market’ (the rest of the people out there) aren’t interested, then you’ll have an uphill battle and likely won’t succeed.
Of course, not everyone is that naïve and if you’re reading this you probably have or fully intend to conduct some market research, but there are still mistakes you could make that will lower the value of it.
These commonly include overestimating the size of the market and not addressing negative feedback.
For example, just because you’ve opened a seafood restaurant in a town doesn’t mean everyone in the town is a realistic potential customer – you have to dig deep into demographics to get a more accurate representation of who is most likely to order seafood from your location. And just because three people you asked to test your seafood platter liked it, doesn’t negate the one person who said the cocktail sauce lacked flavor.
Responding to negative feedback is what makes a business better, not cherry picking the positive.
Many new businesses struggle early on because they are operating from poor research and end up learning most about their market and customers on-the-fly instead of from the research they conducted.
2. Not Building Enough Connections
The suave and outgoing networker might be a little cliché, but having contacts within your industry is invaluable. It increases your opportunities tenfold and makes everything from hiring new staff to getting a good deal on a service that much easier.
Who is best at fixing this? What tool or product is most efficient for that? Having a good network of contacts can help solve such questions.
Today it’s not all about going to awkward events and dropping your card either (though that still works) – with the advent of social media you can network from your anywhere from your mobile device.
There’s Facebook Groups, LinkedIn Groups, Twitter Lists, and Meetup.com is particularly effective for arranging face to face events within your niche.
3. Lack of Funding
Funding is always a struggle whenever you start a new business as nearly all need substantial upfront capital, and unless you’re already rich, this means borrowing it or raising it from investors.
This can be a hurdle from the start or during the beginning months of operation when other problems converge and the business faces cash flow problems or simply isn’t making a profit.
Fortunately, today’s funding sources are much broader than they were just ten or so years ago.
Crowdfunding (Kickstarter et al) is one huge addition that allows you to reach investors and regular people via the web and it also gives you valuable insight into the viability of your business idea. In short, if people like it they will pay to see it develop.
This funding model usually promises the funder a reward, which is often the product itself once it goes to market (a bit like preordering).
Another modern option is P2P borrowing (borrowing from groups of individuals online instead of a single financial entity).
You can still go the traditional route and borrow from friends and family, seek a business partner or angel investor, or use a loan from the bank – and even if they reject you, so-called second chance loans are available online.
If you have the time it is a good idea not to completely abandon your previous line of work when starting a new business, so you can still have money coming in.
4. Failing To Delegate
When you start a new business you feel like it’s your baby and you’re prone to micromanaging everything so you can ensure your vision is fulfilled. Unfortunately not only will this burn you out (when you’re doing too many things at once); resulting in silly mistakes, you’re also shutting your business off from other people’s expertise and input.
New business owners are also prone to doing things themselves to save costs, whether that involves doing the accounts or designing the logos. While this approach can be beneficial to some degree, the costs can be much higher if at some point down the line you decide you’ve made mistakes and need to call in the pros to correct things.
Solving this issue all comes down to planning and honesty. Do you really have the skills to do X task properly? Are you doing Y task yourself because of your ego when somebody else can easily accomplish the same thing if you delegate?
At the very least most new businesses require an accountant and access to legal representation. Nothing brings a business down quicker than the tax man.
5. Lack of Experience
Following on from the previous point, lack of experience is also a big hurdle that newcomers face. This is true generally if you have never run a business before, but also in individual aspects of the business and its niche.
It’s always wise to take as much time as possible to learn – the internet has made almost all the information anyone could ever need freely available and you’re never too old to take formal educational courses.
However, cost-effective help is also available and you don’t need to take on a full workforce (depending on your business). Hiring freelancers online have never been easier with sites like Fiverr and UpWork giving you access to highly skilled and budget freelancers in almost all areas.
You can also take it a step further and use services like Cofounders Lab to find experienced business partners and important hires that can coach you along the way.
Nobody ever said starting a business is easy, but being aware of some of the above hurdles will put you in a good position to succeed. Have any more tips? Leave a comment below!