Challenges in Starting a New Business
Starting a new business can be very exciting as well as challenging. It can be exciting because it might be a transition from being an employee to owning a business and becoming one’s own boss where there is freedom of doing things without anybody’s influence. The idea of being a business owner can be very exhilarating in itself. Bateman states that ‘The control and ownership of a business is a very powerful feeling. Having ownership is like an adrenalin flow. It gives you more energy – you start to see what you can achieve. (Smith, 1997, p. 149) There are numerous advantages of having one’s own business. The potential to earn a higher income, independence, being one’s own boss, ability to fully implement one’s creative talents, choosing one’s own hours of work and a sense of personal pride and achievement are just a few. Establishing a new business has two very distinct features.
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The first is that the entrepreneur is the sole arbiter of his/her ability to start and run the business.
This puts a heavy responsibility on the entrepreneur’s self-knowledge as not everyone is suited to being an entrepreneur or self-employed and it is not always easy to determine one’s suitability. The second characteristic of starting a business is to create one’s own income. This is largely dependent on the type of business and the target market. In theory, a well-run business should succeed in any market. In practice, however, success can be made more likely by choosing one’s product and market. Planning is an important part of starting a business. The success of the business depends on proper and realistic planning.
A good plan would include the entrepreneur’s vision of the business, short, medium and long term goals of the business, people and business partners and their roles and suitability, the product, competitors and the advantage of one’s product over the competitor’s, marketing of the product, finances, risks associated with starting the business and finally, the exit strategy which would determine the future of the business once the entrepreneur is retired. The next and most important phase is tackling the challenges the entrepreneur will face in starting the business. These challenges or hurdles play a vital role in the success of the business.
They manifest themselves in many different forms. The most common challenges are determining one’s suitability to run the business, lack of finance, finding the niche, and the right product, location of the business if it is a retail business, and time management. Determining one’s suitability as an entrepreneur is an integral aspect of starting any business. Being the owner of a business brings along with it a lot of responsibility and hard work. The business may require the entrepreneur to work up to 12-16 hours a day and possibly six to seven days a week as well as holidays.
This is in contrast many more hours than a regular, paid job, not to mention the physical and emotional stress that comes along with it. Added to this fact is the additional stress of not being able to spend much time with family and friends. The family’s ability to withstand the stress that this would put upon them is another factor that an entrepreneur needs to take into consideration. The owner must therefore be able to decide if he/she has the physical stamina to handle the workload and the busy schedule as well as the emotional strength to withstand the strain.
Having prior knowledge or business experience also plays a vital role in determining one’s suitability of being an entrepreneur. Another factor is that the business may require the owner to temporary lower his/her standard of living as initially, there may not be enough income generated by the business in the first few months of being established. This is an interesting situation as people may live under the assumption that starting a business will make them rich very quickly if not overnight. Such an assumption is dangerous as the owner may be in for a nasty surprise with bitter consequences.
The second challenge in starting a business is finance. A large number of small businesses fail each year due to insufficient funds or capital. Many entrepreneurs miscalculate the amount of money they need to start and operate their business. They may later find that they need more capital in order to sustain till the business is fully established. Others are likely to suffer as they may not be able to market themselves or their product or because they find that they are unable to supply all the required products. Yet others may not even have the ability to pay for any extra help.
This one fatal error in calculating the capital may cause the business to suffer heavily and lead to its eventual downfall. It is always wise to explore the possibility of having extra capital in an event that the business required more funds. However, the crucial point still remains that the entrepreneur take great care in determining how much funds are needed in order for the business to survive till the time it can be properly established. Generally, a new business would take around but is not limited to six months before it starts to generate enough income to ully sustain itself. Thus the entrepreneur needs to keep this time frame in mind when determining the initial capital. It would also pay to have a separate living expense for the first six months of starting the business. The third challenge is to find a niche. Knowing which product to sell and the sort of market it will have is another big challenge for all entrepreneurs. Before starting a new business the owner needs to know his/her product and its target customers very well. When deciding on the product to sell, the entrepreneur needs to consider the feasibility of his/her idea.
An important thing that must be seriously considered is the marketability of the product in the prevailing market situation. The business owner needs to know the competition that his/her product would face and the advantage(s) that the product has over the competitor’s, for example being cheaper. The type of product also goes a long way in determining how it would sell to the customers. For example, a basic everyday item will have greater marketability and hence will provide quicker returns than a luxury item directed towards a specific group of people.
This in turn highlights the importance of the location of the business which can be regarded as the fourth challenge. Finding a good site to market one’s product is another challenge. A souvenir retail outlet, for example, will do better if opened in a place usually frequented by tourists such as a beach or a popular holiday destination than opening it next to a children’s clothing store. The fifth challenge is time management. It can be very challenging when everything and everybody requires the owner’s attention.
Entrepreneurs therefore need to ‘manage their time successfully by creating good work habits, planning their tasks carefully, setting their priorities wisely and allocating their time effectively’. (Moss, 2001, Pg 1). The owner must have the ability to distinguish and tackle time-wasting tasks and people from distracting him/her. The talent of recognizing business opportunities and prioritizing tasks in order of importance would see that precious time is not wasted. Having a business plan that reflects the vision of the owner and sets out a clear direction will give stability to the new business.
Knowing the challenges that the entrepreneur is likely to face would help prepare the owner to face these challenges. It would also give the entrepreneur the opportunity to explore the real reason(s) for him/her to start a new business and discipline him/her self to face these challenges. A business plan and knowing the challenges would help ensure the ultimate success of the business and would lead towards the fulfillment of the entrepreneur’s dreams and visions. References: Moss, G. (2001). Time-Savers: Guideline, Checklists & Golden Rules. (2nd ed. ,).