Starting your own business can involve new challenges and experiences.
We’ve identified ten common start-up challenges and how you can overcome them without burning out.
Starting your own business brings many benefits.
Doing something that you love and attracting customers opens in new window to buy the product or service you’ve created is hugely rewarding.
Growing a company and providing jobs for other people can be another big thrill.
But running your own business is not easy.
Working for yourself without the safety net of being an employee can be a lonely, frustrating and challenging experience opens in new window.
By understanding the challenges you might face and how to deal with them, you’ll be much better prepared for potential problems and give your business the best chance of success.
Starting a business doesn’t come with a set of instructions.
We know that understanding the many different types of financial product in the marketplace can be difficult.
Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.
10 biggest start-up challenges
1. Failure to plan
CHALLENGE: With the excitement of a new business idea, it can be tempting to launch without much forward-thinking opens in new window.
Business owners who plan and set themselves objectives are more likely to succeed.
ACTION: Create a detailed business plan opens in new window that covers areas such as marketing opens in new window, staffing opens in new window, finance opens in new window and sales opens in new window.
Regularly review and update your plan as the business develops opens in new window.
2. Lack of demand
CHALLENGE: Understanding the market need for your product or service is a crucial aspect of your business plan.
Without enough people willing to buy your product or service opens in new window, your start-up won’t succeed, no matter how great your idea.
ACTION: Spend time conducting market research opens in new window to collect information about potential customers.
This will reveal your target market’s size opens in new window and help you decide if there is enough demand for your business idea.
3. Ineffective marketing
CHALLENGE: It can be easy to get caught up in the latest marketing trends and spend lots of money on marketing techniques that end up costing you more than the sales they generate.
ACTION: Marketing should be effective.
Create a marketing plan opens in new window for how you intend to reach your customers.
Most start-ups operate on small budgets, so investigate different marketing methods opens in new window.
Are there low cost or even free ways you can reach your target audience opens in new window?
If you have funds for marketing, invest wisely in the most appropriate tactics opens in new window.
Measure all the marketing activity you do and adapt your tactics if necessary.
Consider outsourcing your marketing to an expert opens in new window if you lack the time and skills to do the job yourself.
4. Knowledge and skills gaps
CHALLENGE: As a first-time entrepreneur, it’s unlikely you’ll know everything about running a business.
A lack of knowledge can lead to avoidable mistakes that could cost your business money.
You’ll also need to overcome enormous demands on your time and energy setting up a business.
ACTION: Absorb as much information you can, particularly about the industry that you’re entering opens in new window, the customers you’re targeting opens in new window and the competitors you face opens in new window.
You should also learn about critical areas such as finance opens in new window, marketing and sales, so read business advice websites opens in new window, attend events, join business groups and seek mentors opens in new window.
It takes a lot of work to build a business, so you need drive and energy.
Being self-confident is a bonus.
Our free Learn with Start Up Loans course on entrepreneurial behaviour opens in new window provides detailed insights into what makes a successful business owner.
5. Financial management
CHALLENGE: Poor financial planning is one of the biggest reasons start-ups fail.
If your costs are greater than the revenue opens in new window coming in, your business won’t succeed.
ACTION: You need to understand all the costs your start-up will incur and make sure that your products or services are priced appropriately opens in new window to make a profit.
You can then forecast money coming in and going out of your business.
6. Securing funding
CHALLENGE: One way to manage your cash flow is by securing funding, but raising finance can be challenging and it can be hard to know where to get cash for your business idea.
ACTION: Research the types of funding opens in new window open to you and gather the information you’ll need to share with investors, such as a business plan opens in new window and cash flow forecast.
Government-backed Start Up Loans provides unsecured funding at lower interest rates than from other lenders.
You can apply for a loan of up to £25,000 opens in new window with interest rates of around 6%.
7. Hiring the right people
CHALLENGE: The people you recruit as employees can greatly harm your start-up’s success.
A negative employee can quickly damage team morale and productivity.
It’s tough having to fire someone but having the wrong people in your start-up can be very disruptive.
ACTION: Your first hire opens in new window is an important one, so spend time making sure you find the right person.
Look for people opens in new window who share your values and have valuable experience.
Once you have a team, create an open and transparent business culture opens in new window.
Encourage clear and open communication with your staff, so you understand their strengths and weaknesses opens in new window.
This may also help you deal with staff issues if they arise.
CHALLENGE: As your start-up grows and you build a team, your employees will look to you for strong leadership opens in new window.
ACTION: Be clear about your business’ mission and vision.
Communicate this clearly to your employees.
Employees should understand their objectives, the company’s overall goals opens in new window and be fully on board with the direction the business is taking.
Make sure staff remain motivated and be sure to look after their wellbeing opens in new window.
9. Time management and productivity
CHALLENGE: Managing your time effectively is crucial when launching a start-up.
New business owners have to wear so many hats that it can be easy to get distracted and focus on the wrong areas.
ACTION: Planning is vital as it will keep you on track and focused on your goals.
You can easily end up working in your business rather than on your business, so dedicate a set amount of time each week to reflect and analyse areas that need attention.
Consider using time-management apps to create lists of tasks you can tick off as you go.
If you have an important task to complete, find a quiet area to do it and turn off email, app and messaging notifications.
Outsourcing tasks is another way to manage your time better.
For example, rather than building your website or managing your tax returns, handing it over to a web designer or accountant can be more efficient and cost-effective.
10. Impact on your health
CHALLENGE: Running your business isn’t like having a 9 to 5 job.
Without care, it can be all-absorbing and take over your life.
You need to take steps to safeguard your mental and physical wellbeing opens in new window.
ACTION: Make sure you get enough sleep and take regular time away from work.
Have breaks during the day, eat healthily and get regular exercise.
Having a co-founder opens in new window helps share the load, while joining networking opens in new window events and business groups can give you access to fellow business owners who face similar challenges.
You could also look for a mentor. A Start Up Loan includes 12 months of free mentoring. opens in new window
Thinking of starting a business? Check out our free online courses in partnership with The Open University on being an entrepreneur. Our free Learn with Start Up Loans courses include:
Plus free courses on finance and accounting, marketing, project management, management and leadership.
Disclaimer: While we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.