5 Real-Life Obstacles That Startups Face And Tips To Overcome Them

You are a visionary. Eyes set on top of the hill. Seeing your startup as the next big thing. And five years down the line— you have a huge customer base, money flooding in and your startup scaled into a huge organisation.

It feels good.

But the thing is — to get to the top, your startup has to face challenges. Numerous challenges.

Talking statistically, 90 per cent of the startups fail due to their own mistakes or ignoring the obstacles in their way that becomes a perfect recipe for “self-destruction”. So, for every aspiring entrepreneur, it is important to understand the roadblocks in their way.

This article discusses the same obstacles that startups face. I have listed down the five common ones. But the best part is you’ll also get some tips and real-life experiences to overcome them.

Rake in the moolah

It’s not rocket science. Every startup needs money at varied stages. You need it to validate your idea, developing the MVP, for the product launch, scaling it, marketing, hire staff and the list goes on. No wonder why there are varied funding stages during the startup lifecycle.

As per a  report by CB Insights, 29 per cent of the startups fail because they ran out of cash. This makes lack of funds one of the main reasons for failure.

Stéphane Guérin, the founder of a marketing tool DashThis, shares his experience on managing money as a bootstrapped startup.

He says, “The fact that we deliberately avoided venture capital funding made conscious spending not only important but necessary. We decided to spend less by working on one feature at a time, releasing the tool with gradual updates and upgrades, by hiring just as gradually, making sure every employee is needed and a good fit with the team.”

Paige Arnof-Fenn, CEO of Mavens & Moguls, a branding and marketing firm, warns startups to avoid spending money on trivial things. “I recommend not spending money on things such as fancy brochures, letterhead, business cards, etcetera. Until you know your business is launched, I would say to put your budget into things that help fill your pipeline with customers. Getting your URL and a website up and running is key.”

All these alludes one thing – startups must be highly vigilant in spending their money.

DashThis is one of the fastest-growing companies in Canada while Mavens & Moguls is an established name in the branding industry for more than 18 years. Both the founders suggest managing finance consciously and frugally.  As a startup, you can do that by creating a budget and adhering to it. Planning and estimation of income and expense can help your startup in several ways:

– The budget works as a financial compass that gives you the right direction to allocate the money.

– It helps you review your expected metric with the actual achieved.

– A clear budget helps you determine the funding needs of your startup.

– Enables cutting-off unnecessary and unexpected costs.

Finding the right team

Being new in the market and running on scarce capital comes with several struggles — hiring the right talent is one of them. A survey shows that small business owners looking to hire skilled workers face diverse challenges:

• Candidates lack the skill sets they are seeking (59 per cent).
• Have salary expectations that are too high (45 per cent).
• Prefer to work for a large or midsize brand (29 per cent).
• Want benefits that the company does not provide (26 per cent).

Ketan Kapoor, Co-Founder and CEO at Mercer-Mettl confesses that hiring a talented team was a herculean task for him during the initial years. He says, “Everyone is looking for stability and making good money. You just can‘t expect people to leave their well-paying jobs and settle for low-paying roles to explore innovation and learning. Everyone had their doubts about leaving their comfortable cubicles to work in a garage.”

However, the obstacle is not just finding the operations team but also the right co-founders. You need a balanced team of founders with diversified skills to ensure good growth of your business.

• Utilise your network to hire

One of the things that Ketan did during his initial years was he utilised his network to hire the right team. He approached his acquaintances, friends, relatives, and second-degree LinkedIn connections.

• Go remote

When you find it is hard to get the experienced in-house team, outsourcing the work or hiring a remote team can be useful. Platforms such as Upwork, Freelancer, Fiverr and Toptal make hiring quality freelancers easy. Moreover, it also helps you cut the overhead costs of the in-house team.

• Get a balanced team

When it comes to your founding team members, make sure your startup gets the benefits from diversified disciplines: technology, design, and marketing. This is often regarded as a hacker, hipster, and hustler — the dream team.

Scaling (at the right time)

Once startups get momentum as they achieve the market fit its time to scale up. However, it’s not the issue with scaling itself but scaling at the right time.

Cristian Rennella CEO & CoFounder of oMelhorTrato.com an online platform to compare and purchase financial products says premature scaling was the worst mistake they made.

He explains, “We hired more employees than we could afford. It sounds like a very basic error, but it is not. When you’re growing fast and thousands of new problems pop up every day, you’re not always controlling your economy minute by minute.”

He adds that scaling up was not what they thought. They expected more clients and more revenue but several factors such as delay in payments and drop in sales affected their business direly and were on the verge of bankruptcy.

Cristian’s and his team learned from their mistakes and managed to get out by cutting down their resources. He says, “We had to take a step back to keep standing and then keep walking.”

Now, oMelhorTrato.com has more than 21,500, 000 users in South America including Brazil, Argentina, Chile, Perú, Mexico and Colombia.

• Understand your early revenue

Revenue is considered as the barometer of financial success in business. So when startups initially generate a good amount of revenue, they start spending it or decide to scale up that results in premature scaling.

Michael A. Jackson, a serial entrepreneur and investor cites: “As an entrepreneur, there’s always the temptation to grow the sales team at the first sign of revenue traction, but there is always the danger that this early traction is coming from the subset of the market that are early adopters and not the actual market itself.“ So scaling up on the basis of revenue might not be a great idea.

• Pivot

Pivoting refers to changing the fundamentals of the business. It can be changing your market or even your product. There are numerous examples of big brands that have excelled by pivoting. Pinterest was a fashion curation and buying platform, Instagram was a check-in app, YouTube was a video dating site and Nokia was a paper mill.

Planning your business goals

As an entrepreneur you know setting the goals is critical to the success of your business. They pave a road to the growth and sets you in the right direction.

However, in the face-paced startup environment where entrepreneurs have to wear multiple hats, making plans and working towards it gets quite daunting.

Grant Hensel, CEO of Nonprofit Megaphone & RoundUp App says, “One of the most vexing challenges for startups is planning and goal setting because the environment in which the company operates can change quickly. Annual plans or even quarterly objectives can become obsolete in a moment, and leaders can’t afford to wait until the next quarter to re-calibrate.”

James Ker-Reid, founder and CEO of Sales For Startups explains that a major challenge for startups and scale-ups is striking the balance between ambitious goal-setting and creating actionable plans to achieve them. “It’s easy for there to be a huge gulf between a yearly goal and what to do in the next 90 days or quarter. Often we have goals but haven’t got clarity on how we are going to achieve them,” he adds.

• Make quarterly goals

Planning and working on your quarterly goals is one of the ways to evaluate the progress and understand what’s working for you. James advice to have a short and clear activity cycle that is linked to the quarterly goals which would correlate to the larger yearly goals.

• The one thing approach

‘The One Thing’ approach was introduced by Garry Kelly and Jay Papasan in their book under the same name. Grant Hensel uses this same approach for setting a clear and fluid goal for their company.

He explains, “Under this strategy, we set goals for the one most important thing to accomplish in 10 years, 5 years, 3 years, 1 year, 3 months, 1 month, this week and today. As market conditions change, we can respond in real-time, changing our goal at for appropriate time frames.”

Legal challenges

As a startup, you are prone to face legal challenges but the fact is most of the entrepreneurs often overlook it amidst growing their business. CB insight states 8 per cent of the startups failed due to legal issues.

In their Startup Post Mortem report, entrepreneurs confessed that neglecting the legal part resulted in spending a fortune on lawyers and ultimately shutting down the business.

However, it’s not just external factors such as intellectual property or taxation that breeds vexing legal issues. They can occur from within the company too. For instance, employee agreements and commercial relationships between co-founder.

Do not hesitate to hire a lawyer. The upfront fee you pay for it is quite nominal compared to hefty legal fines you pay to save your business from catastrophe. On the other hand, there are numerous legal resources on the internet such as Startup Lawyer, Startup Company Lawyer, Legal River and more. Use them to understand the legal working and apply to your startup.

There are numerous pitfalls in the journey and startups are ought to face them. However, awareness and careful planning can help you to avoid these obstacles. Even if you are bogged in one of these, remember that there are many startups that made their way out and are running a successful business.

Source: e27