September 27, 2016
There are more than a few issues startups need to handle to make sure the efforts they have put in don’t go to waste. And, to ensure their startup gains traction in the market, gets the required funding from time to time, and reaches the various growth phases successfully, their owners need to know how to notice and resolve such issues effectively as soon as possible. If not, they won’t be able to taste the real fruits of their startup success.
Many obstacles for startups hinder the growth of their business and if entrepreneurs succeed to overcome those problems, the growth becomes easy and scalable. Here are such five major obstacles startups need to overcome to succeed.
1: Sudden and Unexpected Growth
For most budding entrepreneurs, it’s like a dream come true to see their startups grow at an enormous rate. However, a majority of startups fail because their owners don’t know how to handle the sudden, unexpected jump in growth rate. When a startup does find their niche audience and has an offering which has a decent level of perceived value in the eyes of prospective customers, the demand for their products and services will often shoot up.
Experienced entrepreneurs consider this kind of phase to be one of the best opportunities for their startup, though, and not an obstacle. By realizing that this is the right time to move out of the startup mode and leap into the scale-up mode, startup owners can start hiring the right kind of talent and carry out the organizational changes that are required to handle this massive shift in their paradigm.
2: Running Out of Funds Before Hitting a Milestone
It’s almost similar to not being able to reach the nearest gas station and getting stuck on the highway when your car runs out of fuel. What often goes wrong and leads a startup to run out of cash? They fail to achieve the next set milestone before they run out of funds.
However, this isn’t the actual problem. The real issue is that it becomes tough to secure more funding in such a scenario since the results don’t match the expected growth. Even though it’s still possible for startups to raise more funds and keep the ball rolling, the valuation would be much lower.
3: Tough Competition
The market is fierce and there is always tough competition to face if there’s a lot of room for innovation. This could present startups with one of the biggest challenges for survival. More so if your business operates online. There’s no margin of error startups can afford in this scenario and it makes sense to hit back with an aggressive strategy to dominate the niche.
“Though many businesses can choose to offer rock bottom prices for specific products or services to lure in potential customers, implementing this could be tricky if the associated industry or manufacturer has specified a MAP Policy,” says Daniel Relich, CEO and co-founder of Tradevitality, a MAP monitoring software.
Overriding such a policy can be considered similar to price-fixing strategy, which is a gray zone for business and illegal in many cases. So, it’s not advisable to venture into such practices to fight the competition without consulting with legal advisors.
4: Not Being Able to Keep up With the Market
The current market moves at an amazing rate, and if you haven’t been able to keep up with the recent changes in your industry, it can be a major challenge to avoid the roadblocks you will probably hit in the near future.
Although a vast majority of startups across the globe strive for innovation, they are highly likely to get easily distracted by starting multiple projects, trying to penetrate new markets or adopting latest technologies. This often makes them lose sight of their niche market and core projects.
Another couple of common reasons why startups fail is because either they fail to create a product or service that meets the market actually needs. This could either point towards an issue with basic execution (not following the idea validation process), or, a bigger strategic problem (failure to attain the right Product-Market fit).
Though it might take just a few revisions to find the perfect product/market fit, creators might need to go back to the drawing board and re-think the product, go-to-market strategy, and even business model, completely from scratch.
There’s little or no market for the service or product that they have created, which is also another reason of hindrance for startups. This can occur if the value proposition is not compelling enough to make the prospective customers actually commit to transacting with your business, or if the market size of prospective customers that requires the product or service is simply not large enough.
The solution is to build something which truly adds to the market and has a large audience that needs it.
5: Low Market Share
Building a loyal customer base that’s satisfied with your product offerings and even willing to recommend other users is the #1 goal for startups. This is why winning the trust of customers and achieving larger market share is what every CEO and startup owners keep thinking and obsessing about.
The correct approach for winning returning customers is three-fold:
- Offering top-notch customer support to keep the customers happy and satisfied
- Creating a solid product offering that offers so much value that customers have to rely on it for long-term
- Offering incentives that grab attention and motivates customers to both purchase and spread the word
Gaining trust is one of the biggest challenges in not just business, but in general as well. There are countless startups in every domain that have a nice product and proper business model, but are either unable to get new customers to purchase or find it tough to retain the existing customers. You’ll need to overcome those major obstacles if you hope to succeed.
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