5 Small Business Challenges Faced by Startups
When I started my first small business, a few veteran entrepreneurs told me to brace myself for the first two years. After that, they believed it would be smooth sailing.
Times are tougher today. While forming a business has never been easier in most parts of the United States, the economy creates challenges that cause the first year to be crucial for most startups. Addressing these challenges can take you a long way toward success.
5 challenges for business startups
1. Create a plan
It continues to surprise me when I discover that someone is starting a company without planning the details of how it will grow. Hope and enthusiasm are valuable entrepreneurial traits. However, they do not constitute the basic tenets of a business plan.
Tim Berry, founder of Palo Alto Software, has made business planning a straightforward, sane process. You need not create a complex plan for a simple business. However, you do need to know where you want to go and you need a reasonable understanding of how you can get there.
As motivational speaker Zig Ziglar used to chime from the stage, “If ya don’t know where you’re goin’, how ya gonna know when you get there?”
2. Narrow your focus
After working with dozens of startups, I remain perplexed when I see founders trying to be everything to everybody. Baby companies absolutely cannot succeed when they try to manufacture multiple products or sell to diverse markets. Limited resources will mean nothing is ever done well.
Start with one high-demand product or one specific market. Own it. Expand to the next one. Own it. Expand again. Doing this can be the most difficult and important disciplined decision a new CEO makes. It’s critical to pick opportunities that will rapidly deliver revenue and will not divide and waste your energy as a company.
Entrepreneur Jim Hammock had an engraved plaque in his office saying, “Winners focus. Losers spray.”
3. Determine your market
As a former, long-time senior marketing executive, I grow weary of startups believing just "being" is enough to draw customers to them. Even hot celebs who create a product engage in heavy-duty marketing. If you want customers, you must proactively pursue them with passion, persuasion, and a sincere belief that you provide something unique for them.
My least favorite business words: “I don’t have any money for marketing.”
My response: “How will you attract customers?”
While marketing has been integral to successful businesses for hundreds of years, in the twenty-first century it’s an absolute requirement. Companies with limited budgets must get mega creative. Ask yourself these questions:
- Where are your customers?
- How can you get their attention?
- What will make them want your products or services instead of whatever they use now?
- Developing fun, enticing approaches, how can you attract customers?
Forget any preconceived notions of what marketing is. Your job is to win customers. If you come up with a totally new way to do that, you will have mastered guerrilla marketing on your own terms. If you need a push, check out any of Jay Conrad Levinson’s marketing books. And for inspiration, read Tom Peters’ classic Circle of Innovation.
4. Create an Account
Care for your money. Take the action to build a solid credit history. Keep impeccable financial records. If you know you will not do it yourself, hire a part-time bookkeeper before you create a mess.
Learn to manage your cash flow. Denise O'Berry's book Small Business Cash Flow can provide the understanding you need.
Use the services of a CPA who specializes in small businesses similar to yours. Let him or her assist you with minimizing tax consequences long before it’s time to pay taxes. And have your CPA audit your books so you create a history of audited financials.
5. Reflect on your business
At the end of every month, take time to think about what’s working well, what’s a dud, and what you can do to change for the better.
Stick your ego in a mental closet. Everyone makes mistakes. We’ve all made disastrous hiring decisions, committed to what we believed was the hottest marketing idea only to see it fizzle, forgotten to drop a significant deposit in the bank, or screwed up the name of someone when it really mattered.
Life happens. All you can do is apologize, accept your foibles, straighten out messes you create, and move forward toward success a little wiser.
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