11 challenges startups face

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We originally posted this blog back in 2016, but now that we’re a little older and wiser, we thought it was time to revisit it. As a company, we’re now over a decade old, and this year our founders Peter and Daniel won the prestigious EOY Entrepreneur(s) of the Year award (yay!). So it’s probably safe to say we’re not exactly a startup anymore. But we were. And it taught us some of the most important lessons we needed to know in order to get to where we are today. Here are the 11 biggest challenges we’ve faced on our journey so far — and what we’ve learned from them.

Every startup founder knows from the outset that there are going to be obstacles. But sometimes, they can still surprise you — whether that’s because you just didn’t anticipate them, you’re unsure of the best way to respond, or you don’t yet have the resources you need to address them properly.

11 challenges startups face

Startup challenges: What they are and how to overcome them

Startups arguably face more challenges than any other business - particularly in the early stages of development.

Whether its funding, hiring the right people, or reaching enough of the right customers through sales and marketing, every startup will face obstacles that (on the surface) can seem like an uphill struggle.

Here are some of the main issues to watch out for, with some top tips on how to address them when they arise.

Challenge #1: Money

Let’s get right into it: yes, you need money. Unless you’re remarkably lucky and the cash flows in straight away, either from sales or investors, money is going to be an issue sooner rather than later. And when cash flow issues hit a startup, they can hit hard, delaying important progress like rolling out products, hiring key staff, or fitting new offices. You’ll need capital to fund software or product development, office space, marketing, and more. Most of your success will flow from that initial investment. So even though it might seem counterintuitive when you’re trying to minimize financial risk at the beginning, the last thing a startup needs is to trim back costs (and shed staff) in its early days, just when it needs to be focusing its energies elsewhere. In financial planning, startups should proactively adhere to compliance regulations by adopting top AML solutions early, ensuring legal operations and gaining investor trust.

Entrepreneur David Roth doesn’t have much patience for people who founded a startup and then ran out of cash: “As leaders, it’s our job to manage the time and money needed to get to the next level without running out of either one.” So plan it all out before you start, lest you find yourself halfway through and suddenly falling out of the air like Wile E. Coyote trying to run full-speed across a canyon.

Challenge #2: Neglecting marketing and sales

Are you putting enough resources into marketing and sales? Some startups think they can ignore those two functions completely and hope that word of mouth will be enough. Or if they’re a SaaS company, they might believe that sales will grow organically online, and that IRL sales and marketing teams aren’t needed. But it’s a false economy to put your faith in customers discovering you unless you make a concerted effort to grow them with a proper structured plan to promote your startup. An easy to use website builder like ElementorBookmark or Zyro can be a great resource that can help you get your online presence started quickly. Once you have your site up and running, investing effort into SEO can help make sure your website is accessible to search engines and get your content ranking for relevant keywords, driving visitors to your website. Using a tool like WooRank can help you check your SEO health and identify opportunities to improve your online visibility. And when you’re building your sales and marketing functions from the ground up, take the opportunity to make them as aligned and integrated as possible right from the get-go.

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Challenge #3: Lack of planning

It’s amazing how many startups falter because they “forgot” to plan. Or maybe they really did plan, but they just didn’t cover all the bases. Key areas like sales, development, staffing, skills shortage, and funding aren’t afterthoughts. They should all be a part of your business plan right from the beginning. Not only that, but you need to plan for the things you can’t plan for, too. That is, even if you can’t prepare for every eventuality, you need to know what you’re going to do when (not if) events take an unexpected turn. If your business plan is all optimism and fails to allow for surprises, then you’re heading for big trouble. As the saying goes, “if you fail to prepare, prepare to fail.” So don’t leave the details to later.

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Challenge #4: Finding the right people

Certain skills are crucial not only for your business to survive, but also for it to grow. Knowing the exact skills you need — and how to get those essential people on board — might be the determining factor in how well your startup thrives. Delays in finding the right personnel are costly. For a small team, the recruitment process eats up valuable time that could be spent on other areas of the business, but on the other hand, not having the right people can create severe bottlenecks and stall the rollout of new products and services. These are hold ups that no startup can afford, especially in the early days. And, as your company grows, you might find yourself facing another tricky personnel problem: realizing that you’ve hired the wrong people. (Or the right people in the wrong roles.) These kind of uncomfortable truths can be revealed when a startup expands and the cracks suddenly appear magnified. That’s why it’s so important to make it a priority to lay out your hiring strategy right at the start. Then, when you’re clear about what you’re looking for, strategize key hires and think carefully about each role fits in with the goals you want to achieve.  You may determine that taking on freelancers or remote contractors affords you more flexibility and keeps your recruitment costs manageable, for example, or that you’d benefit more from the long-term security of hiring a full-time employee. 

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Challenge #5: Time management

In startups as in life, there’s never enough time. There are a million and one decisions to be made and only 24 hours in a day (and allegedly some of those should be spent sleeping). So start by eliminating or minimizing distractions — anything that gets in the way of running your business. Focus your time and energy on the most impactful things. Ask yourself: what is important and what can be postponed until tomorrow? What is stopping your company growing? Those are the answers you should deal with today. And when you’re trying to set priorities, borrow a tip from former Olympic athlete Ben Hunts-Davis and ask yourself: will this make the boat go faster? That is to say, will this decision or action have significant, measurable, positive results that will help you hit your targets? Or is it just a “nice to have” that you can add later? Cut the noise and focus on things that move the needle (or the boat).

Challenge #6: Your founders

It’s hard to believe, but a startup’s founders — the very same people who passionately nurtured their idea from nothing to a business — may actually be contributing to its woes. While the founders may have developed a great product and set the wheels of the whole venture in motion, they can’t do everything. And even if they could, they shouldn’t. It’s not just a time thing (see Challenge #5); it’s a skill thing. Good leaders know the extent — and limitations — of their own expertise. They know that being a great developer, for example, doesn’t necessarily equate to also being great at sales/finance/marketing/HR/all the many other things a startup needs to do in order to scale successfully. So if you’re a founder, avoid making the big mistake of thinking you can do it all alone. Don’t hoard all the work and major decisions for yourself; spread the workload around. Hire other executives who can fill in the gaps in your knowledge, and listen to what they have to say.

Challenge #7: Scaling up

So your products or services are experiencing phenomenal growth — lucky you! But now you’re finding yourself with a whole new set of headaches as you try to scale to match this increased demand. It’s not just a question of adding a few extra employees. As we learned from Challenge #4, you need to be strategic and prioritize the roles that will have the most impact — and they’re not always the ones you think. Maybe you need to hire more HR staff (since you suddenly have a lot more staff), or maybe you need to focus on building out functions like administration, payroll, or support. You may also need a larger office space to deal with your increased staff numbers (and if you haven’t budgeted for that, you’re going to need to come up with an alternative real fast if you want to avoid stacking your employees like Lego). Or maybe you need to set up offices in other cities or abroad, so you can better support your key customer base. Such is the price of success. If you have a plan and the cash to fund all this, great. If not, then prepare for a painful process.

Challenge #8: Your comfort zone

Growing a startup can feel like taking one step backwards for every two steps forward. It takes grit. At the beginning, you’re going to need to wear a lot of different hats (metaphorically speaking, at least). And you’re going to have to push yourself to go outside your comfort zone on a regular basis. So what are you willing to take on? Are you prepared to put in the hard yards to make your startup thrive? Can you make a convincing pitch to potential investors when you need funding, for example? And just as importantly: is there anything that’s non-negotiable for you? Anything that you do not, under any circumstances, want to do? Figuring out your comfort zone early means you can make provisions for this if you need to, so you can find team members who are comfortable doing the things that make you uncomfortable.

Challenge #9: Competitors

No matter how great your products or services are, it’s a crowded marketplace. And it’s growing all the time: you won’t be the new kid on the block for long, and new rivals can quickly alter the playing field. So you need to put yourself in a potential customer’s place and see how you stack up. What makes your company different? What makes your products special? What makes your brand unique? Why would someone choose you over your competitors? When it comes to your competitors, you need to hit the right balance between “us” and “them.” Don’t define yourself solely in relation to your competitors: you need to be confident about what you’re bringing to the table, too. But you also need to keep your eye on the competition and the (rapidly-changing) landscape. Having the right strategy, being able to think on your feet, and being able to adapt to the new reality will define your success — or failure.

Challenge #10: Poor management

One thing startups definitely can’t afford is ineffective management. A management team that worked well in the initial stages may find itself struggling as the startup expands, as they’re tested by anything from poor sales to market conditions. You need to have the right people to make the right decisions. (It’s no coincidence that Challenge #4 + Challenge #6 = Challenge #10.) So as you build out your leadership team, you need to do two things. (Well, you need to do lots of things, but for the purpose of this particular point, let’s focus on two.) Firstly, you need to make sure that your team is working well together. In order to be effective, you need to keep everyone on the same page. One way of doing this is to build transparency into your management team’s decision-making process, so everyone on the team knows how the important decisions get made. Secondly, you need to make sure that your team is working well, period. Be upfront about what is and isn’t getting results, and if you spot any underlying longer-term issues, address them as soon as you can, before they become major problems. It might lead to some uncomfortable conversations — maybe even some uncomfortable decisions — but having strong management is vital to guiding your startup in the right direction.

Challenge #11: Lack of mentorship

You may have a great product or idea, but lack the necessary guidance, market experience, or knowledge to take it to the next level. That’s where a mentor comes in, with the wisdom and confidence to help you clear those roadblocks that are holding your startup back. According to Rhett Morris of Endeavor Insight, 33% of tech firm founders who are mentored by successful entrepreneurs went on to become top performers. Having somebody you can lean on when major decisions have to be made, or even just when you need a sounding board who has already been there and done that, is super useful. But not everyone will have access to mentors. If you don’t, seek out wisdom from inspirational founders you admire from other sources, like books, articles, or podcasts. And in the meantime, focus on building out your professional network, which can be just as important. And then, when you make it to the top, pay it forward and share your own hard-earned wisdom. Now that we’ve shared some of our top challenges, we’d love to hear about your startup journey. Has your startup faced any particularly tricky obstacles? How did you handle them? Let us know in the comments below.

Startup challenges FAQs

  • What sort of problems do new businesses face?

New businesses face a range of challenges as they navigate the early stages of their operations. These can include issues such as securing adequate funding, hiring and retaining talented employees, managing cash flow and operational expenses, developing effective marketing and sales strategies, dealing with competition, adapting to changing market conditions, and ensuring compliance with legal and regulatory requirements. Additionally, new businesses often face the challenge of establishing efficient internal processes and systems while maintaining a focus on growth and innovation.

  • What is the biggest challenge for startup founders?

The biggest challenge for startup founders often revolves around the ability to navigate uncertainty and manage various aspects of the business simultaneously. This includes wearing multiple hats, such as being the visionary, strategist, marketer, and leader, while also dealing with limited resources, financial constraints, and the pressure to deliver results.

  • What are the reasons some startups fail?

Several reasons contribute to the failure of startups. These include a lack of market demand or a failure to address a genuine customer need, inadequate market research and understanding of the target audience, fierce competition, insufficient funding or financial mismanagement, ineffective marketing and sales strategies, inability to scale or pivot effectively, leadership and team issues, lack of differentiation or a competitive advantage, and challenges in adapting to rapidly changing market dynamics.

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