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Challenges entrepreneurs face in new small businesses

By pauline Oct 16, 2021 #businesses #location #new

The challenges entrepreneurs face can vary widely. It depends on what business they are going to run and how much resources they have. Identifying and coming up with a viable business idea is an entrepreneur’s first challenge. Other challenges could be related to how they choose the right location, raise capital, manage operations and business finances.

In general, challenges also vary over the life span of a business. The challenges faced when starting a business can be different when growing a business. And, this article will focus on the challenges entrepreneurs face when starting a new small business.

Identify viable business opportunities

Screening and selecting viable business ideas is an important part before starting a business. It can determine future success.

Entrepreneurs often find various business ideas from their daily problems. There may be many available. However, not all of them are worth running.

For example, entrepreneurs find business ideas from their hobbies, skills or personal experiences. Another source is from previous work experience. Small-budget research and attending franchise fairs can also be potential sources for business ideas. In fact, some entrepreneurs may come across the idea by chance.

Although there are many business ideas and market opportunities, not all of them are worth working on. And, entrepreneurs must find the most potential to generate high profits in the long run.

Say, you have some potential ideas for starting a business. You still have to sort them out because it’s impossible to run them all. For example, you should answer questions like do they have enough market demand available? Are they profitable to work with in the long run? What about the competition?

And, often, experience can tell the difference between a budding entrepreneur and a mature entrepreneur. Beginners may take longer than mature entrepreneurs to judge how viable a business idea is because they have less experience.

Insufficient capital

After deciding on a viable idea to run, entrepreneurs need capital to finance various business operations. They have to buy raw materials, fixed assets, rent production sites, and recruit employees. It all costs money.

The challenge faced by entrepreneurs is limited capital. Some small entrepreneurs rely on money out of their pockets. Or, they get it from family or relative contributions. Others rely on online channels to raise capital through crowdfunding.

Then, another alternative is to find investors to fund the business. In this case, entrepreneurs must make a proposal and a business plan to attract investors willing to invest their money in them. And convincing investors is not an easy task.

  • Biasanya, investor akan mempertimbangkan rekam jejak pengusaha dan seberapa layak ide bisnis, misalnya terkait dengan pertumbuhan dan keuntungan dalam jangka panjang. Potensi pengembalian juga menjadi pertimbangan berikutnya karena memang, berinvestasi di bisnis baru mengandung risiko yang tinggi.

Some successful entrepreneurs raise capital at a low cost. But others don’t. They often fail for several reasons such as:

  • Bad business idea. For example, it is profitable in the short term, but not in the long term.
  • Bad business plan. Thus, the proposed proposal failed to convince potential investors. They are reluctant to provide capital.
  • Has no track record. This makes it difficult to judge whether the entrepreneur can actually operate the business successfully or not.
  • Inadequate knowledge. Some entrepreneurs may be more dependent on personal money and bank loans because they do not know other alternatives. Lack of knowledge can lead to insufficient or expensive capital.

Find a suitable location

Location not only has a big impact on success, but also on cost and competition. For example, renting a restaurant business location in a city center can attract a large number of customers, increasing the company’s chances of generating sales. But, it will also consume large fixed costs such as rental fees. In addition, the competition will also be high because many competitors are targeting the same customers in the same location.

Due to high fixed costs, many startup entrepreneurs operate from home as a starting point. It can save rental costs. Meanwhile, to market their products, they can rely on online channels. Then, when they have generated sufficient regular income, they can rent a more strategic location.

Threat of competition

New businesses have low competitive capacity. They have more limited resources than other established businesses. In addition, they have less market knowledge.

Thus, competitive pressures are always a problem for new businesses, unless they are first movers and offer a completely new and unprecedented product.

One way to survive is to observe competitors and find market and product gaps. I mean, new businesses look for loopholes so they don’t compete directly with established competitors. For example, they identified it by asking the following questions:

  • Do competitors’ products and prices match market demand and satisfy consumers?
  • Do they reach all customers?
  • Are there some underserved markets?

By mapping them out, new businesses can find gaps for market opportunities. They then design the product and choose the right market segment without having to deal directly with competitors.

Build customer base

Another challenge entrepreneurs face when starting a small business is building a customer base. It affects how quickly they can generate regular income.

To grow the customer base, entrepreneurs must be able to attract customers as quickly as possible, for example by setting promotional prices and advertising products. If successful, they can slowly establish a business position in the market. And, once they have a customer base, they can generate regular income to cover various expenses.

But, building a customer base is a tough challenge for the following reasons:

  • Existing companies can adopt an aggressive strategy if they feel threatened. It can cause a new business to fail because it has a low competitive capacity.
  • Customers are reluctant to take risks by switching to new products. They prefer existing products because they have felt the benefits.
  • Potential customers are few. Most have used products similar to those offered by new businesses.

Then, how successful new businesses are at building a customer base depends on how successful they are at encouraging customers to repurchase the product. In other words, they have to make customers loyal to them to do so. If successful, the money will continue to flow to them.

There are several ways to create customer loyalty, including by offering:

  • Superior after-sales service.
  • Effective customer complaint handling service.
  • Added new features to the product.

Gathering the right team

Entrepreneurs do not work alone to start, operate and grow a business. They need a team. And, ideally their skills complement each other. That way, business operations can run successfully.

Finding the right team is the next tough challenge entrepreneurs face. They must find the right people, support their vision and goals and be willing to make sacrifices by being a part of their journey.

Why is being willing to sacrifice important? Some people may not be willing to join a new business. Working in a new business is at high risk of losing their job. That’s because of the high failure rate of new businesses.

For such reasons, many people prefer to work in established companies. They don’t want to leave their status quo. And, leaving a comfortable position to pursue something uncertain requires sacrifice.


Jobs in new businesses are often not well distributed. In addition, few staff, lack of experience and inadequate equipment also cause other problems. Another challenge is complex work.

With the obstacles above, entrepreneurs must be able to overcome them. They and their staff often have to multitask. They must master several different aspects, from research, product development, marketing to customer service. And, it can be a strenuous and exhausting job.

The next challenge for entrepreneurs is to keep their team motivated and cohesive. Such a complex job gives rise to so much burnout, it leaves the team unmotivated. In addition, conflicts also often arise.

Money management

To keep the company running, entrepreneurs must make sure they have enough money to cover all expenses. They need to be able to keep a close eye on their cash before the business can actually generate revenue and profit. They have to make sure it comes out to a completely justifiable expense.

Failure to do so could cost the company cash for future operations. And, it can lead to business failure.

Psychological pressure due to loss

Reaching the break-even point takes a long time, let alone to make a profit. Continuous losses can demotivate startup entrepreneurs and their staff. This condition requires entrepreneurs not only to motivate themselves but also the team.

There are several ways to deal with such losses. For example, on the cost side, they map business processes to find where they can save costs.

Then, on the revenue side, they also have to find answers to how to increase revenue, for example lowering the selling price slightly to attract higher buying volume.

By pauline

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