Developing a startup into a small to medium-sized company is what many entrepreneurs strive for. The same is true for most business newcomers. However, this isn’t easy. Just 2 in 5 startups turn in good profits, while others will either break even (1 in 3) or continue to lose cash (1 in 3). Why does this happen? Well, startups face greater obstacles and challenges on their path to success. Some of them are too unique only for the startup scene. With this in mind, let’s explore some of the key challenges startups face and what you can do to overcome them.
Partners and decision-making
Since there is always a lack of funding when it comes to startups, one of the ways to fund your own is through a partnership. In the ever-expanding and ever-changing digital era, businesses have to fight hard in order to survive, and startups also find it difficult to find partners that are trustworthy. If going into a partnership, startups have to identify various factors before considering to cooperate with another business in the same niche. Startups should look for enterprises that enjoy a sterling reputation amongst the industry big names and robust presence in the market.
Exit plan strategy
One of the biggest considerations for startup founders is their exit plan. What do you, as a founder, want to build, and how would you like to leave the business? For example, your dream may be to create a business and then sell it for big bucks, cashing out even before your startup starts to generate steady profits. This model is called “Fast Burner”. Or, you may want to develop a steady income for you and your investors, one that will last for years – the so-called “Slow Burner” model. However, both models require that you understand taxation laws and nuances of the country your startup originates from. For example, the Australian startup scene has significant taxes for exiting founders. Aussie startup founders face the same capital gains tax (CGT) as a passive investor if they decide to sell their business down the line. Which is why startups there often contact accounting firms like Pherrus accounting for tax strategy and planning.
Unqualified staff
Most of us understand how hard it is to find the right talent for a startup, especially when the company has budget constraints. Since most startups cannot afford a hiring agency, the founders initially get their team members on board. However, because the founders are often too busy with other issues, there is a big probability of misgauging and hiring unsuitable candidates. Hence, developing some benchmarks along with tests is essential for gauging the candidate’s real knowledge about the subject. Every new business requires someone who can comprehend its vision, who is brimming with initiative and flexibility. Implementing two to three rounds of an interview on various aspects can easily help with finding a suitable candidate.
Risk control
A large part of growing a startup is taking risks. Playing on the safe side has its benefits but will not show if a company or an idea is profitable or not. However, accidents can occur. The property gets damaged. People leave the startup. Comprehending the risks associated with your company planning is, thus, quite important. For example, insurance helps. Worker coverage, theft and fire, redundancies and medical call all aid you if the trouble comes knocking on the door.
Networking all day long
Networking is at the core of startup financing. Developing (and nurturing) relationships with other enterprises and business contacts is one of the most fundamental aspects of growing your business. For starters, it is recommended to consider people you already know. Past work experience can be of great help for growing your business venture.
Although, if you’ve just begun a new business while still working for another one, or you’re expanding into a field where you have few connections, there are several things you can do to get started. For instance, you should cast a wide net to help cover more “networking ground”. Growing pains are to be anticipated when you’re expanding or scaling a business, and they’ll grow in size as you increase the number of employees, clients, and regions. Some of the presented obstacles may come along on your way to success, but with careful deliberation and preparation, you can have a smooth transition from an early-stage startup to a more established company.
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