Launching a business can be a fulfilling and lucrative pursuit, opening up new avenues of income, providing financial and creative independence, and enabling people to shape the market and the world through innovation and creation. However, it can also be an intimidating and challenging journey, and one that is not guaranteed to lead to success. Only around 40% of small businesses end up turning a profit, with another 30% just breaking even. This implies that 30% of all new small businesses end up losing money—a frightening prospect for startups and entrepreneurs who are just beginning.
Fortunately, there are strategies and tools to overcome these obstacles. Here’s a look at some of the most significant challenges that entrepreneurs encounter, as well as the best ways to navigate them.
Creating an Effective Sales Strategy
It’s one thing to create a quality product or service that solves customers’ needs. It’s another thing to get them to buy it. You could have the most perfectly designed, expertly manufactured product, but if no one buys it, your business will fail. Quality unfortunately isn’t enough, on its own, to sell something. That’s why it’s so crucial for entrepreneurs to develop an effective sales strategy to get their product or service into customers’ hands.
The development of an effective sales strategy requires a valuable product or service, correct pricing, strong branding, an understanding of psychology, and deep knowledge about the target customer and the current market, including competitors’ offerings and any unmet customer needs the market isn’t fulfilling. Nearly all of these factors can be strengthened through market research, statistical analysis, and continuous communication with existing and potential customers. In other words, it’s not enough to make something great—it’s equally important to know what people want and how to sell it to them.
Raising Startup Capital
Except in the rare cases where entrepreneurs have their own startup capital, most new businesses will need to find creative ways to fund their enterprise. Financing methods can include traditional bank loans, angel investors, loans from family and friends, federal Small Business Administration (SBA) loans, debt, venture capital, crowdfunding, and any number of other strategies. The key is to develop a dependable pool of capital that can support the company through its first few years of business, including product development, marketing, staff onboarding, and scaling. Effectively raising startup capital means more than just finding money—it means finding enough of it and knowing how to budget effectively and realistically.
Developing Sustainable Revenue
The ultimate goal of nearly all businesses is to become profitable, which typically means developing a sustainable stream of revenue. The form this takes will vary depending on the type of company and the product or service being sold, but regardless of the specifics, the underlying formula is simple: Revenue needs to grow to the point where it is consistently larger than all combined expenses, preferably within three years. In order to do so, companies need to have strong products and effective marketing, develop and stick to short- and long-term budgets, focus on what they do best, outsource when appropriate, and hire the right people. If this doesn’t seem possible from the get-go, then it’s generally not worth starting the business at all.
Hiring and Retaining the Right Employees
A business is only as strong as its people, which is why attracting, hiring, and retaining the right talent is so important. High-quality employees will naturally be attracted to successful brands and strong leaders, so it is up to the entrepreneur to develop an organizational culture that is inclusive, innovative, and inspiring. Good leadership is the key to a strong workforce, so entrepreneurs who are ready to start hiring should work to improve their leadership skills—for example, through mentoring. They should also encourage networking and collaboration, prioritize open channels of communication with managers and employees, and find ways to ensure employees know they are appreciated and essential to the success of the business.
It costs between six- and nine-month’s salary, on average, to hire a new employee. Whenever possible, the goal should be to hire the right people the first time and keep them on the team long term.
Scaling the Business
Most successful companies will eventually reach the point where they need to scale the business in order to streamline expenses, maintain a competitive edge, and maximize profitability. The important thing is to scale properly, which means doing so at the right time—not too early or too late—in the right manner, and with the right amount of capital backing up the growth strategy. Scaling a business is one of the most important phases in its lifecycle, and one that may happen numerous times throughout the existence of the company. Entrepreneurs should put as much effort into researching and preparing to scale as they do when launching the company.