Common Challenges That Startups Face And Ways to Overcome Them

In the last decade, the world has seen the number of startups grow by leaps and bounds. Every young entrepreneur has a vision that they believe in and they hope to build a business that flourishes. Over the past year alone, the number of tech startups in India has grown by over 12%.

However, there has been a significant drop in the seed stage funding. This is because investors are losing confidence that entrepreneurs will be able to face economic uncertainty. It is extremely common for startups to fail after getting the seed funds hence making seed investors the most at-risk in the community of investors. The number one reason most startups fail is lack of sales but there are few other all-important issues they must grapple with. 

Attracting the right talent

The first employees that any startup founders hire are the people that run the show. Since the business is just starting out, it is important for all employees to be capable of working independently, play multiple roles, and take full ownership of their respective roles. However, it is quite a task to find such talent. Moreover, hiring the wrong people could lead to delayed deliveries, unforeseen costs, and several other bottlenecks for the business.

Solution: These employees usually have great expertise in their field. Thus, startups should offer a share in the company stock as an incentive to the first employees.

Getting the first few clients on board

For any business to grow, one of the most important factors is to acquire the first few customers, get them to use their products/services, and spread positive word-of-mouth feedback. Because of the existing competition in their niche, new startups find it extremely challenging to encourage the target audiences to choose their brand over the brands that they already trust. This, in turn, makes it difficult for startups to scale up their businesses.

Solution: An easy way is by providing lucrative deals such as free samples, heavy discounts, and free trials for a limited time period. Recording feedback of the customers who have used the product first-hand and circulating these on social media and among the target audience would help the startups attract more customers.

Managing and monitoring the cash flow

Startup founders usually get carried away – they tend to measure and monitor the cash flow only in terms of sales and direct expenses. They overlook other costs such as the cost of real estate, marketing campaigns, technological investments, employee compensations, and other predictable and non-predictable costs. Without taking these factors into account, startups face a major obstacle, especially in times of a cash crunch.

Solution: To overcome this challenge, startups must always monitor all kinds of expenses – payables and receivables – and prepare detailed balance sheets and cash flow statements. Furthermore, they must consider each aspect of the business and anticipate some unforeseen costs that they might have to bear.

This article is written by Prashant Lohia, CEO, Ginesys System Limited.