Entrepreneurs face daunting challenges when starting down the road to build their dream business. The problems facing entrepreneurs fall into three categories: money, people and personal.
Cash is a vital concern for any business, especially startups.
Startup capital: Having enough capital to start a business is usually the first problem of entrepreneurship. Entrepreneurs tend to underestimate starting expenses and overestimate growth of sales. Businesses will typically run negative cash flows during the early months that will consume startup capital.
Even after the business begins to generate positive cash flow, the owner has to make sure that money goes for the right expenses and does not get wasted.
Sales: Nothing happens without sales. Developing a solid, stable customer base is essential when starting to build a foundation for growth. Identifying and reaching the right audience takes focus and effort. It takes time to strategize and create a campaign to attract the target market. Even when you have the best products or services, it is still possible to fail if you do not have a loyal customer base.
Marketing: Figuring out what is going on in the minds of consumers is always a bit of guesswork. Designing a marketing strategy with this much uncertainty is a challenge. Doing the research to find the best way to position products is essential to have a chance at success.
Social media: This is a new age. Consumers are more connected with a variety of social media platforms, such as Facebook, Twitter and Instagram. Entrepreneurs have to learn how to use social media to promote their products and get the message out to potential customers. Failures of management strategies will get reported and quickly spread across the internet.
Accounting: Nobody likes to do bookkeeping, but it has to be done. Just mentioning doing the books makes most small business owners anxious. This is a good task to outsource to an accounting service.
Cash flow: Life for entrepreneurs would be perfect if sales just rolled in and customers paid their bills on time. Unfortunately, reality does not work that way. Expenses still have to be paid, even if sales are down and some customers are slow to pay. Managing cash flow and keeping enough cash in the bank is always stressful.
Budgeting: Every entrepreneur struggles with budgeting. Selling is much more fun, but someone has to figure out where the money is going to come from and where it should be allocated. How much to pay to attract the best employees? What amount should be spent on marketing and on which media? What are the controls on operating expenses, cost of materials, insurance, legal fees, etc.?
A functioning budget should lay out a plan on how the business will operate to make a profit. Which products will be sold and how much gross profits will they produce? How much are the fixed expenses?
Recruiting: Business owners can not do everything themselves and will eventually need to hire employees. Bringing on people with specific skills and paying them enough without breaking the budget is a challenge. One solution could be to hire part-timers or freelancers until the business builds up its cash flow.
In the beginning, owners feel they can handle everything themselves. While the ability to multitask with many skills is admirable, the execution may be lacking. A smooth start needs people who are well-trained and skilled to shoulder the responsibilities.
An owner trying to do everything can create issues for the business with slow responses to customers and poor execution of normal business activities.
Employee retention: With unemployment rates at historic lows, recruiting qualified employees is difficult, but retaining them can be even more challenging. A company has to offer competitive benefits and make sure that employees are satisfied and productive with their jobs. Happy employees need recognition, days off and the belief that they will also receive promotions and benefits with the growth of the company.
Just like the business, employees need nurturing.
Delegating: At some point, an entrepreneur has to pass responsibilities to the employees. The owner has to come to the realization that not everything can be done by the owner. If the business is to grow, the owner must hire the best employees, train them and let them do their jobs.
The change from a do-everything owner to a manager of people is a crucial transition for an entrepreneur trying to develop and grow a business.
Being your own boss is the dream of most entrepreneurs, but it comes with a price. The freedom of not having to answer to someone else becomes the obligation of having to answer to the needs of the business. In this sense, the business is the new boss.
Work-life balance: Starting a business will consume a lot of time, energy and commitment. Not letting the business prevent you from having personal time is a challenge. An entrepreneur needs to set aside time in the workweek to spend time outside the business and stick to it.
The failure to deliberately manage a work-life balance can lead to burnout, health problems and lost relationships with family and friends.
Where to start: Starting a business requires a seemingly endless list of things to do; it can be overwhelming and lead to paralysis and inaction. The best approach is to organize the tasks, pick one and get started.
Managing growth: After making the first sale, the next challenge is to manage growth which will require more money, time and employees.
Making decisions: Since you are the owner, you have the final decision. The business, in the beginning, will not have a management team to consult with. The decisions all belong to the owner, and this can be a daunting feeling of responsibility, knowing that you alone have to bear the consequences of your decisions. The employees expect the owner to take charge and direct the troops.
Self-doubt and criticism: In the beginning, customers and competitors will not take a budding entrepreneur seriously. Everyone will be quick to share their opinions on what you are doing wrong and why it will not work. The truth is, outside of immediate family and close friends, nobody will be rooting for your success.
With this ocean of negativity, self-doubt will start to creep in. Maybe they are all right. Maybe starting this business was a bad idea. If you have done your homework, this is the moment to overcome the fear of failure and have the confidence in yourself to keep going.
If you ask entrepreneurs what problems they faced when starting a business, the answers will usually be the same: money, employees and personal issues.
All businesses need enough equity capital to survive startup and growth with sufficient cash flow coming in to pay the bills. Employees will consume a large portion of that cash flow, but they are part of the growth of a business.
In the meantime, the owner has to maintain enough self-confidence to persevere through the negativity and huge challenges and not lose the belief that the business will undoubtedly succeed.
So, what is the first thing to do when starting a business? No simple answer exists for this question. An aspiring entrepreneur must address all of these challenges at the same time. However, being able to successfully handle all of these problems is the gratification for starting the business in the first place.