Tuesday, September 4, 2018

7 Key Challenges of Launching a Startup

It may seem daunting to know that 8 out of 10 startups will fail in the first 18 months, but it doesn't have to be. To begin with, many successful startups took a few tries to actually get right. 

Just because an initial startup may fail doesn't mean it doesn't provide valuable experience to get the second or third try up and running. Ultimately, all startups fail because they run out of money. 

What causes them to run out of money is the question. Here are 7 key challenges to launching a startup.

1. Expanding Too Quickly

When people think of growth, they often think of expansion. In truth, those are two very different things. In reality you often have to grow before you expand. Getting an order for 1,000 units of your new product may seem like a windfall, but not if you don't have the production facilities in place to handle an order that size. 

Suddenly having more clients than you can handle sounds ideal, but in reality it can be the death of your business. When you plant a seed, it can be months before you actually see growth. 

That doesn't mean the seed hasn't been busy beneath the surface planting roots that will support the expansion when it happens. Make sure you understand the difference between growth and expansion.

2. Having the Wrong Partners

No one individual can singlehandedly build a successful startup. They need partners that bring something to the table in the form of wisdom, experience, contacts, money or some combination of all. 

What you don't need, however, are partners that bring little to nothing to the table. Your best friend since high school might be your most loyal friend, but that doesn't make them a good business partner. 

Similarly, be careful who you allow to invest in your startup. Most investments come with strings - make sure you have a very clear understanding of what they are before taking any money.

3. Failure to Adequately Judge the Market

No matter what product or service you have to offer, you need someone to buy that product or service. You may find an area you think would be perfect for an upscale coffee shop, but that doesn't mean the residents of that area are going to buy your upscale coffee. 

Before you offer a product or service, you need to ensure there is a market for your product or service. If there isn't one, that doesn't mean all is lost, it simply means you will have to build one.

4. Failure to Build a Market

While you may actually hit on a product idea or service people are genuinely hungry for, it is rare. More often than not, you actually have to convince people they need the product or service you are offering. 

When Starbucks first started selling coffee in the 1970's it was unheard of to spend more than about 50 cents on a cup of coffee. Starbucks actually had to convince the entire world that a cup of coffee was something worth spending upwards of $4 on. They didn't walk into a ready-made market, they built one.

5. Lack of Security

The minute you actually invest something into turning an idea into a reality, you have something to protect. Whether that is your proprietary blend of spices, your manuscript or customer information, you have something that can be stolen. 

Anything that can be stolen needs to be protected or it can signal the end of your business. These days it is important for all businesses - from the smallest startup to the largest corporation - to invest heavily in cybersecurity. 

Small businesses are often in the greatest danger of being hacked because they think they are too small and insignificant to be worth hacking. They are generally wrong.

6. Lack of Proper Insurance

There are any number of catastrophes and cataclysms that can prematurely derail a startup. From fires, floods and other disasters to the death of a partner or investor to costly lawsuits, startups can suddenly find themselves stopped. 

Making sure you have the proper insurance is critical to any startup. In addition, you should always work with a reputable agent from a reputable carrier. It is also important to do periodic reviews of your insurance with your agent to make sure that your coverage is keeping pace with the changing needs of your startup.

7. Burnout

Building a startup into a full-fledged business is a marathon, not a sprint. The tasks involved in building a startup are never-ending and they can easily become overwhelming. 

Generally, the people that actually successfully shepherd a startup into a fully operational business pace themselves and don't lose sight of what is truly important. They take care to maintain their relationships, their physical health and even their outside activities. 

While it may take longer to build a successful company by going at a slower pace, you also give yourself a far better chance of actually seeing the finish line.

Wrapping Up

People who successfully guide a startup to a full-fledged business often seem to anticipate what is going to happen long before it ever does. That's because in one sense they do. 

While this list doesn't cover every potential pitfall of building a startup, the full list of things that can derail them is not actually that long. Savvy entrepreneurs make it their business to know every single thing that can go wrong and generally have a plan in place for dealing with it.

Jasmine Williams covers the good and the bad of today's business and marketing. When she’s not being all serious and busy, she’s usually hunched over a book or dancing in the kitchen, trying hard to maintain rhythm, and delivering some fine cooking (her family says so). Tweet her @JazzyWilliams88

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