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What Do Start-up or Early Stage Businesses Struggle with Most and Why?

March 12, 2014 by Dr. Jon Warner in Entrepreneurship with 1 Comment

What Do Start-up or Early Stage Businesses Struggle with Most and Why?

A recent survey suggested that the following five items represented the issues that small business owners and entrepreneurs struggle with most:

  1. Slow or lost sales
  2. Unpredictable business conditions
  3. Late paying customers (or failure to pay at all)
  4. Falling real estate value
  5. Inability to gain credit or the high cost of credit

Let’s look at each of these in a little more detail and what, if anything can be done to tackle them.

Slow or lost sales

Many businesses have inevitably had to try to run faster in slower economic times, but the real picture is not the same for everyone. Some businesses have been performing much better than others by seeking out new markets and customers, introducing new or adapted products and services and by partnering with other businesses which help them to gain access to other revenue streams or lower overall costs. The point here is that sales always need to be strongly pushed. Too many businesses forget this and are left with the only option then available, which is to cut costs.

Unpredictable business conditions

There is no doubt that business conditions in general are tougher across the board in recent years. However, much of this is not controllable (being more to do with the wider economy, political or even social-side challenges). But rather than to view these changes negatively (which sometimes they are of course) there is also the opportunity to view them positively. Revenue lost in one sector of the economy is gained in another for example (and this new sector may therefore have unmet product or service needs). Similarly, social side change presents opportunities for possible growth. This is often possible though the use of new technology (which again needs embracing more than resisting).

Late paying customers (or not paying at all)

Tougher business conditions will often lead to longer days outstanding when goods and services are supplied on credit (and more customers may go out of business than before). However, once again this provides an opportunity for a different approach. Some customers need closer management and bills/invoices will need to be chased more often. In some cases, customers may need to be given new terms and conditions of purchase, possibly allowing them to pay later but at a higher purchase price if that is what they prefer. The implication here is that no business needs to be hostage to its late paying customers but can engage actively with them to keep cash flowing.

Falling real estate value

This is both an internal and external business cost. If a business owns property then its balance sheet values will have probably fallen on average for many in recent years (and made everyone more nervous). Customer real estate has also fallen or been flat, meaning that some customers may have less discretionary income than before. Although customers can do little with the latter problem, their own balance sheet can be strengthened in other ways, and perhaps property is not the investment it once was anyway). In so doing, businesses can make their balance sheet less dependent on volatile property prices in the future.

Inability to gain credit or the high cost of credit

It has been widely reported in the news in recent years that the banks and other lenders have become more conservative than they once were in offering money to businesses and particularly to start-ups and less mature enterprises. However, this often just means that customer needs and new potential markets have to be better researched, financial forecasts have to be more robust (with good sensitivity analysis contained within them) and business plans have to be more carefully written. If this occurs then there is still both debt and equity funding to be had for good projects. 

Summary

Surveys which say that businesses face a number of challenges and make it difficult to make a decent profit will continue to be published regularly in the future. However, in both good and poor conditions, all businesses, no matter what their size need to be agile. Every challenge is therefore an opportunity to change things or do something differently and avoid joining the many that simply complain that “things are not what they used to be”.

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About Dr. Jon Warner

Dr. Jon Warner is a prolific author, management consultant and executive coach with over 25 years experience. He has an MBA and a PhD in Organizational Psychology. Jon is Editor-in-chief of ReadyToManage, Inc. and can be reached at Jon@OD-center.org

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One Comment

  1. Max AramMarch 14, 2014 at 10:53 pmReply

    Great article and can’t agree with it more! However, as a start-up company, one other challenge that we have been facing is hiring the first key employees and growing from a start-up with 2 founders to a company with 5-6 employees. In general, scaling is a big obstacle start-up companies should overcome. As a joint report (Startup Genome) by UC Berekly and Stanford University stated, scaling too quickly is one of the main causes of failure for tech start-ups. The temptation of “Going Big” too quickly can hurt the company severely. Being part of an accelerator/Incubator can keep be a huge asset for first-time entrepreneurs. Little advice in early days may have huge impact on the future of the company and its direction. Good luck to all the entrepreneurs out there who chose to pursue their inside “Why?” which drives them everyday.

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Jon Warner

Jon Warner is an executive coach and management consultant and in the past has been a CEO in three very different companies. Read more

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