3 Common Challenges Startups Face and How to Overcome Them New businesses face well-worn issues. New research has identified three of the most common concerns founders face. Here they are, along with some tips to overcome them.
By John Rampton Edited by Mark Klekas
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Starting a business may sound like a major accomplishment, and on a certain level, it is. But the real question is: can it survive? 60% of startups don't make it to Series A funding. Of those that do, more than a third don't make it to Series B.
What quickly brings down so many aspiring business owners? In their new research, the experts at Play Bigger identified multiple core issues that early-stage founders typically face.
These challenges aren't chosen at random or selected by "expert analysis." They come straight from the mouths of nearly 1,000 business owners themselves through their own straight-shooting investor updates. Here are some of the top issues identified by the study.
Related: 7 Ways to Fund Your Startup in 2024
1. Struggling with customer acquisition and urgency
Two of the top core issues revolve around customers — something startups tend to be light on early in their lifecycle. 85% of founders reported a lack of urgency. They can get people in the pipeline, but they can't close the deal.
Additionally, 95% of all founders say that they have difficulty with customer acquisition. Often, the link between an innovative new technology or product and a customer's pain point is lacking.
Starting with the latter, it's important to focus on benefits over features. This can be challenging for an entrepreneur. You're excited about what you've developed. You want to show off the "magic" behind it all — and there's a time and place for that. However, the overwhelming emphasis during the sales cycle must center on customer pain points and how your new product or service can solve them better than your competitors.
As far as urgency is concerned, you must position your solution as something that requires action immediately. Customers will naturally de-prioritize a solution in favor of addressing a different problem. This leads, in the words of Play Bigger, to "intrigue without action."
How do you overcome a lack of decision-making? You create it. There are multiple ways you can increase the urgency behind a sales pitch. Connect benefits to real-life value. Emphasize scarcity and exclusivity through deals and discounts. Study the customer journey and align your sales pitch with their decision-making process.
2. Misallocated resources and scaling issues
Two more key issues revolve around the misallocation of resources and challenges scaling a startup — reported by 70% and 80% of founders, respectively. These are challenges that go hand in hand.
Let's start with the misuse of resources. Already a common issue, this has been exacerbated by Silicon Valley's "fail fast" mantra. Business leaders are encouraged to act with little to no restrictions, even if that can lead to wasted funding and a shorter runway.
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Don't use your startup as an excuse to spend cash. Look for ways to set up spending "bumpers" for your organization from the get-go. Clarify your financials in your founding documents. Use concepts like the Lean Six Sigma methodology that emphasize the elimination of waste. Foster a culture of efficiency and accountability with your founding staff.
When scaling your enterprise, it's important to shift from a primarily innovative mindset to a perspective that prioritizes problem-solving. As your customer base grows, look for ways to position your brand as a place where your target audience can solve their problems.
Make sure to gather feedback. Study the problems your target audience is trying to solve. Then, use the information to develop targeted, high-value new solutions as you scale. (And remember: having a lean, mean operation in place also makes scaling much easier.)
3. Investor skepticism
Finally, we have investor skepticism. Corporate Finance Institute (CFI) defines an investor as "an individual that puts money into an entity such as a business for a financial return." Of course, even a passionate founder usually is interested in a financial return —even if it is just one of multiple objectives.
However, CFI adds the important clarification that "the main goal of any investor is to minimize risk and maximize return." Investors don't want to see additional risks added to an already risky startup situation, which makes them easy to scare. That's why 80% of founders reported investor skepticism as a core startup survival issue.
If you find you're facing dubious investors, you want to regain their trust. In the same vein as creating urgency in your customers, take the time to demonstrate a clear connection between your innovative solutions and market demand. What problems are you solving? How will you tell that to customers? By communicating this to investors, you can allay fears and even lay the groundwork for further funding down the road.
Overcoming early-stage issues with your startup
Every startup faces challenges. The question is, can you overcome them? You can give yourself the best shot at success by doing your homework and preparing for potential issues that can arise.
Core issues like those identified by Play Bigger are common and can be deadly to a startup's momentum and even its survival. Use the information above to avoid and minimize their impact as much as possible so that you can shepherd your fledgling organization to Series B funding and on to even greater heights.
Related: Seed To IPO: Here Are the Different Funding Stages In a Startup
