Entrepreneurs choose to start businesses for many different reasons – it might be a great spark of an idea, a need for a change of pace, or out of pure necessity for a limited company setup. Like every big decision in life, forming a company comes with its own set of challenges which often get in the way. We put together this list of the biggest obstacles faced when you start a business, and some tried and tested ways you can begin to overcome them.
1. Not having the funding
This is probably the most common obstacle, and one which everyone faces. You have a great idea, but where does the money come from? Banks are increasingly reluctant to loan out startup capital and unless you’re lucky enough to have plenty of spare cash saved up, you could be struggling to find the money you need.
One option is to apply for one of the many funding programmes available. Programmes such as The Formations Company’s Entrepreneur Award can serve as a great resource. Others such as Voom Pitch from Amazon offer entrepreneurs the chance to pitch their idea to potential investors.
What money you do get will need to go a long way. Careful financial management is going to be crucial for you as you start your business and this means maintaining a strong understanding of your cash flow. Make sure you know what money is in your account and that you understand the difference between profit and cash. Many entrepreneurs see business coming in and count that as part of their assets, even if the money hasn’t arrived yet. Unfortunately, bills can be delayed and people may not pay on time. If you’re not careful you could end up spending more than you can realistically afford.
2. Not having enough time
You might find when starting a business that you have big ambitions, but don’t have the time to achieve them. You might have a family to care for, which takes a huge amount of time and effort. You might still be working a day job which takes up the bulk of your time during the working week, before you even get to all the other little jobs that crop up throughout the week. Before you know it, the time has been and gone and your great idea remains a work in progress...
Overcoming this particular obstacle is difficult, but it is possible with a little organisation. Try drawing up a timesheet and making a list of the key deliverables you want to achieve. Let’s say you want to have a business plan in place by the end of the week. Make that your main task! Schedule in time over the course of the week when you plan to get it done and make sure you stick to it.
3. Not having the right connections
We’ve all heard the saying: “It’s not what you know, it’s who you know,” and whether we like it or not, it’s true when it comes to starting a business and ensuring it grows successfully. The point is, connections are crucial and can work magic, so it’s important to get out and meet as many people as possible to ensure this isn’t an obstacle for you.
Fortunately, there are plenty of business networking events on offer. Have a look online and see what’s available in your local area. Get out there and meet people – there really is no telling what might come of it. You could meet another entrepreneur who could come on as a partner, a potential backer or someone who can help you launch in a certain market. Whatever happens you should set out with a target and purpose. Think about what you want to achieve and go to places where you’re most likely to meet the people who can help you reach those goals. Nervous about making the first move? Our list of networking tips is a good place to start.
4. Not knowing the right structure for the business
Right away when you decide to start working for yourself you’ll need to choose between being a sole trader and a limited company. Choosing the right company structure is important; it can determine the manner in which you work and your financial liability later down the line.
Here’s how it works: a limited company is a separate entity to you, the owner. Unless there is proof of fraud you cannot be held responsible for the company’s actions or debts.
This is useful if you plan to employ people and start building an organisation, even if it’s very small to start with. The more people you have, and the bigger your company gets, the greater the benefits of being a limited company will be. It also helps you look the part. Potential partners and clients might be more inclined to have faith in a limited company than an individual.
You will have to pay tax on your profits and be responsible for organising PAYE for employees, however. If you’re a shareholder you may be liable to pay tax on any dividends. A company can offset its tax liabilities against losses, but you can’t do the same as an individual.
As a sole trader, though, you can offset income tax against losses and will pay income tax and national insurance on your taxable profits. Still, you are the business and will be liable to any debts it accrues.
5. Feeling inexperienced with marketing
Few business operations see more money wasted than on marketing, and that’s because of two things: firstly, it’s expensive, and secondly, most business leaders don’t know how to do it. Start with the cheapest option. Social media channels can be inexpensive and relatively effective. They help you build a profile and interact with your community.
As you get bigger you might decide you want to invest in other forms of marketing such as print or radio advertising. The costs are much higher, and the coverage will be wider, so you’ll need a clear plan in place if you choose this route.
Try building your own skillset to give yourself the best chance of marketing your business successfully. Try out inexpensive or free classes to learn the basics – General Assembly have some good cost-effective options here, or for completely free guidance on marketing for beginners, check out the dedicated marketing section of our site.
Time to get started
Yes, these are just some of the obstacles starting a business, but they are the most commonly experienced. Starting a business or going it alone as an entrepreneur can be one hell of a wild ride, with plenty of bumps along the way. But no obstacle is impossible to overcome, despite what you may feel right at the beginning. If you’re well prepared, you’ll be able to tackle each one in your own time.