STARTING a business is a big undertaking for many entrepreneurs, but maintaining one can be a bigger challenge.
In their first few years, small companies will come up against a myriad of different challenges. Some are harder than others to overcome and according to the U.S. Bureau of Labor.
There is a truism that states 70% of all small businesses fail by the end of their first year. By the second, that number rises to 90%. It’s no wonder if one takes a look around their local shopping complexes and pasar borongs.
So if you are planning to start a business, you should always prepare for any foreseeable challenges that might come up.
KC See, serial entrepreneur, author of a number of business management books, corporate trainer and business coach for many businesses in Asia shares some of the most common business challenges he’s seen over the 35 years he has been in business.
1. The higher cost of running a business
Many individuals with a dream and an entrepreneurial spirit set out to start their own business. That dream can quickly turn into a nightmare if they don’t have the financial resources to keep the business running.
Underestimating the costs they will need to run the day to day business is a key contributor to business failures, so it’s important to plan for and understand exactly what it will take to be successful.
Entrepreneurs should get educated about the costs that go into running a business. A good budget helps, but there are many hidden costs of running a business that can quickly run you into the red.
These overlooked items often include:
- Permits, licenses and dues
- Office, space and utilities
- Equipment, maintenance and upgrades
- Employees and benefits
2. More competition as more people venture into the same industry
Competition in business arises whenever two businesses or more sell the same product or services, each wanting to not merely thrive, but become the leading business in the market, gaining the most profit.
Business competition can be fierce, especially in markets with aggressive competitors and customer spending is slowing down.
Knowing and understanding the competition is a critical step in designing a successful marketing strategy.
If you are not aware of who the competition is and knowledgeable about their strengths and weaknesses, another firm would likely enter the picture with a competitive advantage, such as product offerings at lower prices or value-added benefits.
Identifying your competition and staying well-informed about their products and services is the key to remaining competitive in the market and is crucial to the survival of any business.
3. Hard to recruit and retain talents in organisations
The issue of the nation’s high unemployment rate is not foreign to all of us. However, despite the high demand for jobs by the jobless, many companies still struggle to find the right talent with the right skills for their business.
It was fairly common for workers in the 20th century to work for the same company for most of their careers. Employee turnover wasn’t as big of an issue as it would be now.
Millennial adults, ages 24 to 38 are now the largest generation in the US workforce.
A staggering 91% of millennials expect to only stay in a job for less than three years, according to the Future Workplace “Multiple Generations @ Work” survey.
Younger workers historically have lower tenure rates and are more willing to bounce from job to job. Most younger workers are more mobile with fewer obligations holding them down.
Many aren’t married, don’t have kids, and don’t own a house yet. This frees them up to try new things and live in new places.
They are also looking for growth opportunities early in their careers to set them up for success in the future. Younger workers also tend to job-hop more than older workers as a means to quicker career advancement.
Now that they comprise the largest segment of the workforce, expect to see the overall tenure rate fall.
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4. Old business models
At the intersection of new technology, market trends, and positive growth is the need for an innovative business model. Surviving the challenges of a rapidly changing world means traditional brands must learn how to incorporate trends and technologies into their current business plans.
A new business in development has to have a business model if only to attract investment, help it recruit talent, and motivate management and staff.
Established businesses have to revisit and update their business plans often or they’ll fail to anticipate trends and challenges ahead. Investors need to review and evaluate the business plans of companies that interest them.
This is where some businesses may find themselves in need of assistance. The business may be running smoothly, but a paradigm has shifted and what has once worked is now faltering.
Smart businesspeople might even consider joining seminars or even workshops like the Building Smart Business seminars for current and updated ways to continue their business operations.
Periodic deconstruction of old models to make way for new ideas will clarify your overall vision, and the new approach will stimulate growth, open new markets, and help you endure inevitable industry disruptions.
Many of the top companies in the world are successfully adapting to change by harnessing technology, borrowing ideas from other industries and reimagining what was once unthinkable.
5. Speed of change in business is increasing
The speed of change has accelerated significantly in the last years and affects all types of businesses, both local and global. The internet, technology development and globalization has made it easy for a new business to popup anywhere and affect/disrupt almost any type of business.
As KC says; today’s success could become tomorrow’s failure. Take a look at what happened to Kodak and Nokia.
Virtually every industry has been experiencing rapid, massive, and sometimes devastating change over the last couple of years.
Failure to adapt means losing out to your competition, and anyone can be your competitor.
Just look at what Airbnb has done to the hospitality industry. Or what Uber and Lyft have done to the transportation industry. How Spotify prompted Apple Music to advance their iTunes platform which was itself a profound innovation to the music industry.
You can also read: 5 Strategies To Build A Business During Challenging Times.
6. Harder to get funding for some sectors
You don’t have to search very far to find entrepreneurs who have had a tough time raising outside capital to grow their business.
More than two-thirds of 1,000 entrepreneurs polled in a survey recently released by Ernst and Young found it difficult to gain access to the capital they needed to grow.
There are two sources of funding for a growing business – lenders who loan you money for some time and look to get repaid with a return, and investors looking to buy a piece of your company in return for long-term capital gains when the price of your stock increases.
Challenges are only the difficult tasks you have to face, but starting a business also comes with possibilities of unforeseen disasters to occur due to mistakes that could have been prevented.
5 Common Mistakes When Starting A Business
With 35 years of experience in the business industry, KC shares the 5 common mistakes that most people who wish to start a business tend to do include:
Many people have great ideas but when it comes to implementation it becomes a huge challenge they’re simply unable to see through. There are plenty of ideas but it is the execution and the ability to make it work that determines your success.
Lack of research done before starting a business
Starting a business without proper research and study is one of the most common mistakes out there.
They just start a business depending on their gut feeling which might be a good input but its not something you can do based on the gut feeling alone.
There must be research and study to ensure all of the effort and money you are going to put in are not going to waste.
No consideration of others’ ideas
Falling in love with an idea without considering other people’s ideas – you may only want your ideas to be implemented if market research has shown that your ideas do not work.
It is important to listen and be willing to make adjustments to ideas in order to cater to the needs of the market.
If you have insufficient funding, your overcommitment will lead to high inventory, high cost and overstaffing.
This will happen if you start your business being over-optimistic when you need to be more conservative to avoid issues.
Being out of touch with the market requirements and what the market wants is a surefire way to lose your money in the business.
You are not going into that business serving only yourself, but the market.
You may start your business great, but you need to understand that in today’s time and age, changes will happen very quickly and suddenly.
What Should You Do For Starting A Business?
In summary, if you plan on starting a business, look back at all of the 6 main challenges and 5 common mistakes business owners often face to make sure that your business doesn’t go through unnecessary complications.
If you’d like to position yourself at the forefront of the market, join the Building Smart Business In Challenging Times seminar by KC See and earn the opportunity to learn these 6 modules:
- Module 1: Smart Business Principles – How Not to End Up With Another Job
- Module 2: Your Smart Business Idea, Opportunity, Identification & Innovation
- Module 3: Marketing Mathematics – Proven Formula To Multiply Your Smart Business Profits
- Module 4: Smart Business Modelling The Key To Business Success
- Module 5: Marketing Physics Re-Engineer Your Marketing
- Module 6: Leverage Your Way To Grow Your Smart Business
Over the past decade, KC has trained, mentored and coached over 120,000 people from all walks of life, helping them achieve breakthrough results in their life, income and business goals.
From professionals to CEOs, directors and business owners, KC has also worked with SMEs and multinational corporations to improve their performance, productivity and increase their organisation’s bottom line.