It’s not easy to find success as a startup. Approximately 75% of all venture-backed startups eventually fail, for a variety of reasons. To succeed, you need hard work, support, resources, and a lot of luck.
As an entrepreneur, you’ll face many obstacles along the path to success, however success may be defined for you. Some of these obstacles can be predicted; others will be unforeseen. How you deal with each obstacle in turn will determine if you make it or if you fail.
Here are five top obstacles startups today face and have to overcome if they’re going to be a part of that 25% of startups that break through and succeed.
Resources are key to any successful venture, but many startups don’t have enough – namely in the form of capital.
A business has to have sufficient operating capital to make it through the rough early years of a startup’s life. The rule of thumb is to have two years of funding that you can rely on to carry you through, whether this funding is from private savings or VC/angel investments. (It is risky to fund a startup on loans, especially as interest rates are rising.)
Businesses that fail often don’t have enough funding to survive the slow early period when you’re trying to acquire customers, grow, and develop lines of revenue.
A Lack of Knowledge of the Business Environment
Another common obstacle is a lack of in-depth knowledge about your business environment.
A business environment includes the knowledge of your industry, product, market, customer base, and competition. It also includes necessary knowledge like operations, logistics, human resources, legal, marketing, etc.
Founders who fail sometimes don’t have the knowledge themselves to run the ship, or dont have the people who do have that knowledge, which leads to…
Startups want to be lean, and lean is good – to a point. It’s not good if you don’t have the right people – or enough of them – to get a startup going and keep it growing.
Successful CEOs and entrepreneurs understand that it’s hard to find success as a startup if you scrimp on people. You need to find the right people with the right culture and the right knowledge/training to fill in the gaps of info and ability that you can’t provide. And even if you can, you’ll try to do too much yourself, which will lead to failure.
No Strategy for Customer Acquisition
The line “If you build it, they will come” from Field of Dreams doesn’t apply to startups. Businesses don’t magically get customers just by opening their doors, and even if a few people stumble upon them, that’s not enough to sustain growth.
Your startup needs a solid customer acquisition strategy that clearly explains who your audience is and how you’ll get them. This needs to start with short-term acquisition and move through the first few years to retaining customers and turning them into advocates for your business down the road.
A Weak Brand and Message
Finally, startups often fail because they don’t have strong brands that stand out from the rest of the crowd.
Every industry is crowded. Unless you’re creating a new industry – which precious few startups actually do – you’re going to have stiff competition. You need to differentiate yourself from the pack, and you’ll need a strong, powerful, distinct brand to do it.
Focus on the why as explained by Simon Sinek in his “Golden Circle” TED Talk. The “what” and “how” aren’t nearly as important at first. You have to know why you’re doing what you’re doing and why people will care before you can convince people to come to you instead of your competition.
Overcome these obstacles, and your chances of joining that magical 25% increase dramatically.
EO Birmingham helps entrepreneurs get the knowledge, mentorship, and networking they need to succeed, from startup leaders to established executives. Learn more about joining our organization today.