Common Problems Faced by Startups

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Creating a new organization is no easy task. Entrepreneurs face many challenges and hurdles especially during the first year of a startup’s inception. Starting a new business is akin to getting married where things seem rosy with many dreams in the beginning. But soon after the reality sets in and not all is hunky-dory all the time. This corollary has been drawn by many great minds like Paul Graham. But the hurdles and challenges are not impossible to overcome if understood properly. With the ever evolving entrepreneurship ecosystem, these hurdles and challenges are becoming less unyielding.

Most of the common problems faced by the startups can be grouped into the following categories:

Finance

Entrepreneurship is still at infancy in India. The startup ecosystem is getting more and more calibrated with every passing year. But still one of the biggest problems that startups face is the problem of sufficient cash flow to sustain the business in the initial days. The startups do not get Angel funding easily as in India there are very few angel investors who can support startups in the early stage.

In the business world which is marked with uncertainties, a fledgling startup has to deal with many uncertain variables such as customer behaviour (directly relating to buying decisions), number of days for getting credit from vendors, duration for realization of the receivables, inflation and managing employee retention & performance. In such a situation having enough cash aside to ensure that operating expenses are met, becomes a challenge.

Management

The second type of challenges relate to the Management issues. This group includes problems such as:

  1. Deciding who will be the CEO among the co-founders
  2. Employing and retaining qualified employees
  3. Motivating employees
  4. Setting targets and measuring performance

These are very important issues and close to 50% of the startups face these problems. Though there is a thumb rule that ‘if you have to get into managing employee issues in a startup then you may not want to retain such employees and/or co-founder’. But it is easier said than done. In reality there are not many talented employees who would want to work in a startup especially if the startup is not funded by investors, as they know that they might have to compromise on their salaries. Also, choosing and getting the right co-founder is extremely difficult.

Marketing

One of the very important problems faced by startups is to cost effectively advertise about themselves. Marketing and advertising are very costly services and a startup who does not have surplus funds need to tread cautiously so as not to blow away the scarce financial resources. Startups have to and should rely heavily on network marketing and word-of-mouth services in order to save marketing costs. Remember the startups have to compete with the established behemoths that will have separate budgets for every marketing and advertising stint.

Technology

Another very important problem commonly faced by startups is how to be the most tech-savvy in their field of business in the most cost effective way. Selecting the software and integrating technology within the organization for automating processes so as to cut down on the ‘time to go to the market’, is one challenge which every type of startup faces. For startups, it is important to go to the market with the most viable product faster and reduce the sales cycle. In other words, receive income faster from the customers in order to keep the operating capital flowing and reaching break-even faster.

One way to overcome the technology problems is to maximize the effective utilization of the internet and the progressing cloud computing technologies.

Implication

The above discussion points out to one thing that everything boils down to minimizing costs and maximizing profits. Many of the problems faced in technology, management and marketing can be solved by collaborative tools such as BootStrapToday – directly or indirectly. Briefly, BootStrapToday will arm your startup with the following solutions (for a detailed version read our article on BootStrapToday – How Can It Benefit Your Startup?):

  1. Being available as SaaS it can reduce not only your software costs considerably, it will also help you save on overheads
  2. Being available as SaaS it will free your human assets from long unproductive hours of maintaining and upgrading software. As a startup you can utilize their talents towards growing the core business.
  3. BootStrapToday will help you in collaborating not only with employees virtually, but also with your customers and vendors. It will help you reduce time and energy spent on meeting task deadlines.
  4. The cumulative costs saved per month directly translate into funds which can be pumped in growing the business.

2 Responses to “Common Problems Faced by Startups”

  1. Startup Kitchen Criteria

    [...] Peter Shankman, founder of Haro stated that the entrepreneurs listen too much to their friends.  Bootstraptoday.com proposes that it is financial, management, marketing and technology.  Joanna Krotz of Microsoft [...]

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