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5 Startup Challenges That Derail Many Entrepreneurs

Posted on the 05 February 2020 by Martin Zwilling @StartupPro

problem-aspirations-avoidingAs a mentor to entrepreneurs, I tend to see many of the same obstacles appearing in every new startup, and since I don’t want to appear to be a downer, I’m not sure how to properly warn people ahead of time to be on the alert for these challenges. In fact, since most entrepreneurs are eternal optimists anyway, they would never believe any negative scenarios could happen to them.

Yet, in the interest of full disclosure, and an honest intent to save future entrepreneurs some grief and money, I would remind you that starting any business has key dependencies on at least five major elements, including product design and delivery, the right people on the team, adequate funding, a sizable market opportunity, and marketing. Each of these can go astray as follows:

  1. Your product or service hits unexpected snags. Despite your best planning efforts, innovative solutions always take longer than expected to deliver, and functional or quality problems will appear at the worst possible moment to jeopardize success. See the story of Elizabeth Holmes and Theranos for an example of product snags leading to a disaster.

    My message is to anticipate the unknown, buffer your plan schedules, and above all communicate frequently to key players using integrity. Too many entrepreneurs think that expert external advisors are suspect, or will slow them down. Don’t hide in your office.

  2. A principal player bows out or does not deliver. Even the strongest relationships are often tested and broken by the stresses of a new startup. That’s why investors will usually decline to fund startups made up of family members or fighting co-founders. Personally, I’ve seen many promising startups come apart prematurely due to relationship breaks.

    Of course, there are no guarantees, but I still see otherwise smart entrepreneurs taking shortcuts in their hiring, or jumping into business relationships based on emotion or low cost. When people problems arise, it’s critical that you make changes as required quickly.

  3. Funding is depleted before customer sales ramp up. One of the pitfalls of optimism is the expectation for early customer growth, and understating the real costs of design, development, and inventory. Some startups I see actually “fail by success,” with too many orders coming in from major retailers before vendor long payment cycles can catch up.

    The solution here is to never stop the fundraising cycle, moving quickly from friends and family, to angels, to venture capitalists. Don’t underestimate your own value as customers arrive, establishing a line of credit, and borrowing against inventory. Keep control by writing every check personally, and manage receivable and payables tightly.

  4. Your customers and competition make unexpected moves. The world today never stands still. Competitors see the value of your idea, and the good ones move fast. Key markets come and go as social and political winds drift. Amazingly enough, I often find that entrepreneurs, once started, are slow to adjust due to ego or inexperience.

    Every startup should assume the need to pivot at least once, if for no other reason, you probably missed the target audience to some degree on the first try.

    Examples abound of startups who had to pivot for success, including Twitter moving from podcasts to social commentating, and Yelp moving from email to online. Smarter entrepreneurs don’t wait for a crisis to drive change, by defining key milestones and metrics for tracking progress. Keep your plan updated, and don’t be caught off guard.

  5. Marketing and sales take more time and effort than anticipated. Every entrepreneur seems to start with the assumption that “if we build it, they will come.” It doesn’t work that way anymore, so don’t count on word-of-mouth to keep you ahead of the crowd. You need your best people and real resources dedicated to early marketing and branding.

    It pays big dividends to keep up with the latest strategies in your marketplace that have failed, as well as succeeded. Don’t wait for that worst case scenario where the customers aren’t buying, and hope to fix it by cutting prices. First impressions last a long time.

Again, I’m not trying to be a downer by suggesting that every entrepreneur will face all these problems, but I’m a strong believer that being fore-warned allows you to be fore-armed. It’s a lot more satisfying, and a lot more fun, to be able to flash the smile of success and understanding, than to spend most of your time is crisis mode, tackling problems you never anticipated.

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