How to Overcome Obstacles When Starting a Business KEY TAKEAWAYS
New business owners have every opportunity to grow with a robust strategic plan. Reaching and connecting to customers needs branding and identifying the target audience of your product or services. Managing finances while investing and completing accounting, bills, and taxes, should be done efficiently. At the same time, maintaining a work-life balance helps in future growth with a strong mindset. Like owning a home, starting a business is part of the American Dream. Every day people with ideas about how to provide a better or less expensive service or product have the opportunity to turn their thought leadership into a lucrative enterprise.
As exciting as launching a startup might appear, the vast majority of small companies fail. That’s largely because entrepreneurs face unexpected obstacles and lack the experience to overcome adversity.
According to the U.S. Chamber of Commerce, 99 percent of the country’s successful companies are considered small startups with less than 500 employees.
These 3.2 million organizations employ 62 million hard-working community members and account for upwards of 43.5 percent of our GDP.
Unfortunately, data published by the U.S. Bureau of Labor Statistics indicates that 18 percent of startups shutter during their first year, and 50 percent do not reach the five-year mark.
If you are considering turning your ideas into a livelihood, it’s significant to conduct due diligence and plan for the challenges that lie ahead.
Knowing how to accomplish work such as establishing an attractive brand and opening a business bank account suitable for a new venture, among others, will put you in a better position to weather the economic storms.
Branding and Marketing Misses The branding and marketing of a product or service are pivotal to an organization’s success.
Too often, new company professionals are so enamored with their ideas that they forget others do not share in the vision. You may know why a product or service provides valuable benefits.
However, potential customers and clients need to be brought into the loop and excited about the brand.
These rank among common branding faux pas and ways to avoid making similar mistakes.
Failure to Communicate a Brand A newly minted operation must articulate what it does and who it serves in word, deed, and images.
Consider a high-profile corporation such as Nike. Once an upstart sneaker company with a little-noticed “swoosh” logo, the company invested in a young Michael Jordan and built its brand around the then-rookie NBA star.
Jordan got young people excited about running faster and jumping higher by wearing sneakers. This branding and marketing campaign progressed into the “Just Do It” slogan we all know today.
The point is that Nike communicated what its products were about: sports. Nike built a brand with a memorable logo and created a story that resonates with consumers. After all, who doesn’t want to “be like Mike?”
Fail to Identify Your Target Audience Some startups use a scattershot marketing approach. They throw out advertisements and social media posts, assuming everyone will want their product or service.
This approach waters down your message and wastes time, energy, and money trying to entice unlikely consumers.
Before launching a marketing campaign, conduct surveys to compile consumer information and create a buyer’s profile.
Then, narrow your marketing efforts to people most likely to pay for your offerings.
THINGS TO CONSIDER Apart from using online apps to analyze user interests for a certain product or service, it’s also helpful to modify and adapt your business to make it more customer-centric.
Launching an Underfunded Business The notion of starting a business on a “shoestring” budget sounds exciting, bold, and adventurous.
There may even be an underlying belief that people will immediately gravitate to the startup, and the cash will flow like a river.
In reality, the greenback stream can dry up quickly. And when entrepreneurs are reliant on their own money, they effectively set themselves up for failure. More than 80 percent of small companies fold due to cash flow shortfalls.
It’s far better to spend your time researching potential customers and clients. Objectively weigh why your venture can do it better and cheaper than competitors.
Compile this and other pertinent information and pitch the venture to investors or apply for a small business loan.
Most startups need at least a year to a year-and-a-half to begin turning a profit.
With a war chest sitting in a business bank account, you’ll significantly improve your chances of long-term success.
Not Knowing How To Manage Business Finances It’s relevant to step back and assess your strengths and weaknesses as a new company owner.
People who launch an operation too often get themselves into wearing multiple hats.
This generally includes filling positions, brokering deals with third-party service providers, and managing cash flow.
One of the inherent errors visionaries make is not taking their lack of corporate money management experience to heart.
There are a significant number of moving parts that require thoughtful financial management, such as the following.
Hiring Employees: Needing someone to hold down a position does not necessarily mean your organization can afford to pay them market value. It’s not uncommon for an occupation’s going rate to exceed the bandwidth of a startup. Don’t try to onboard experienced professionals at every level. Look for passionate, intelligent people who are champing at the bit to prove themselves. Along with keeping labor expenses low, upstarts tend to bring great energy into the workplace.
Strategic Bill Paying: The transition from a good salaried job to business ownership presents vastly different financial challenges. As an employee, you took home a salary and managed household finances. The money math was simple. Payment of credit cards, spend less than you earn monthly and funnel a percentage of your income into a 401(k). Managing new enterprise cash flows isn’t quite that simple. You’ll need to calculate negative income against your reserves and strategically pay bills. Loans and lines of credit charging the highest interest rates should be prioritized. And, always pay employees on time and in full, or you’ll be sitting in a big empty office.
Open A Business Bank Account: When considering a business bank account, getting good terms and value-added benefits is relevant. Paying unnecessary charges only depletes your limited resources. Banks that are open arms to startups may waive the fees associated with brand checking, savings, and lines of credit. Don’t just open a business account with a convenient or high-profile bank or local credit union. Compare the pros and cons. Making the right choice for your new venture can pay dividends.
Losing Your Work-Life Balance Brimming with excitement about getting an enterprise off the ground and seeing it through to profitability can prove emotionally and physically exhausting.
The inherent problem is that entrepreneurs can be so determined to work tirelessly for success that they burn out and fail.
According to the American Psychological Association, “3 in 5” employees suffer from work-related stress and anxiety.
More than a quarter experienced reductions in energy, and 36 percent struggled with mental fatigue.
Highly motivated new company owners tend to shrug off the adverse effects of being overworked.
Rather than fall into a work-too-much rut, create a schedule that balances your personal needs.
Take two days off weekly, plan vacations, and practice self-care such as mindful meditation, exercise, hiking, or hanging out with friends.
Not Having the Right Connections The overused adage that “it’s not what you know, but who you know” does ring true when someone launches a new business.
The inability to connect with potential consumers or not having contacts with organizations that would benefit from your services hinders earnings.
Sometimes, it’s better to take a position in a niche industry and get to know the players.
The professional relationships aspiring entrepreneurs make can help bring in enough cash to buoy the operation through year one. Take stock of who you know before hanging out a shingle.
The graph below shows the number of new business applications that were submitted from 2021 to 2023.
Choosing the Wrong Business Structure Searching for a proper business structure can insulate you against civil lawsuits and minimize your tax liability.
Opting for one that does not necessarily provide the benefits you and your startup require can have a chilling effect.
These rank among the most common types of legal structures for companies.
Sole Proprietorship: If you plan to be an owner-operator, a sole proprietorship allows revenue and tax liability to flow through the company to you. Rather than the entity paying excessive taxes, profits are handled between you and the IRS. The drawback to a sole proprietorship is the fact no legal distinction exists between you and the company. That means you could be held personally liable if an incident occurs.Limited Liability Company (LLC): The LLC tends to be the most well-known structure for entrepreneurs and small startups. Like a sole proprietorship, taxes pass through to your personal IRS filing. However, an LLC offers protection from civil liability associated with the organization.There are wide-reaching corporate structures to consider when launching a new venture.
For example, options such as a C-Corp or S-Corp tend to be complicated and may require hiring a lawyer.
That expense can significantly impact your cash-on-hand, creating yet another financial obstacle.
Before entering the marketplace with an innovative product or service, consider taking advantage of resources such as your local Chamber of Commerce and Small Business Administration guidance. It’s better to look before you leap into the competitive business landscape.
Also Read: Tips for Growing a Successful Business
