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Top Five Challenges for Start Up Companies

If you are like me, then sometimes you learn new things and actually state – “I wish I had known this 5 – 10 – 20 years ago.”

This is a common theme as leaders and entrepreneurs grow in experience through the school of hard knocks and trial and error. For this reason, I have decided it is time to share information, knowledge, experience and wisdom with others – so just maybe, they will not have to ask the above question.

Now the reason it is important to understand the five non-negotiable and threatening challenges to a Start-Up organization is quite depressing. Research shows that 80% of new businesses fail in the first five years. Seems the 80/20 rule is still accurate when applied to the percentage of surviving start ups. Only 20% of the start-ups make it to their fifth year anniversary.

Some very good research into what is needed for a company to successfully grow (and remain in business) is for the leader to focus on the most important things in their business during this time period. James Fischer conducted this research and formulated guides for the leaders and CEO’s to navigate the Growth Curve for Small Businesses.

This research covers companies with 500 employees or less. – Yes, even the sole owner or one person shop is impacted by the information contained in this model.

So, let’s look at the Five Non-Negotiable Challenges a Start Up Company in Stage One of the Growth Curve must focus their time and energy on mastering.

Here are the Top Five Challenges for Stage One…

  1. Cash Flow
    I know you know – Cash is King for any business. Yet, for a start up it is the most critical part of doing business. When you run out – you lose! It is as simple as that. Now, the key to cash flow is to monitor it on a daily, weekly and monthly basis. Check your cash, establish a minimum cash level, establish cash reserves during good times (you will encounter bad times that are totally out of your control) and use Cash Flow Analysis to track the sources for incoming and outgoing cash. Think shoestring style in the early days. It is even a good idea to capture opportunities to fund your growth and expansion activities and limit your borrowing activities since the payback with take your cash away from your control.
  2. Destabilized by Chaos
    Chaos is a normal adventure in the world of a start up business stage. Multitasking is the rule rather than the exception and as your staff grows you suddenly learn what you did not know how to explain since you just did it rather than plan for it. There are issues that come up since there are a lack of processes and systems to ease the impact of chaos or sudden change of priorities. By the way, one sure way to fail is to become inflexible to any type of change. Inflexibility and poor relationship skills are numbers one and two of the failure drivers. Learn how to adapt and flow with the chaos rather than fight it.
  3. Slow Product Development and Getting To Market
    This is the one that has caused me the most grief over time. Why? Because when you are starting up you want to be the at the center of all decisions and creation. So, creating new products and successfully getting them to market becomes an issue since you are involved in all the daily activities and your time is dominated int he present. To break out and grow financially you will need to schedule time for the development of new products for your company to grow. You could outsource some of the development or the “getting to market” side of the process – the key is know who can actually do this correctly with the expertise you have. Big Challenge yet the biggest payoff when done correctly. It must be planned out and executed as a project.
  4. Limited Capital to Grow
    This is big. The key issue with any start up is how well funded are you? Growth, expansion and start up activities all take capital. Some people go after “start up funds” from joint ventures, family, or private placement. The down side of this is two fold. First, you usually give up an equity position to get these funds which devalues your ownership interest. The second is very interesting – there is a tendency to throw cash at problem or issues rather than think through the problem or issue and find another solution. I have seen small start-ups race through cash like a hot knife through butter and fail in record time. The reason for these failures is the leadership does not learn to deal properly with adversity. And when they have no more money to throw at issues they panic and quit – end of the company.
  5. Improve Sales
    This is the closest thing to a no-brainier in the list. Yet, it is often the major issue. Many start-ups are lead by non-sales people who believe people or businesses will line up to buy what they make – as soon as it is built. The “They will come if I build it” myth. The key for success in improving sales is simple  – someone must be selling everyday. Whether you do it in person, using e-commerce or internet marketing techniques – YOU MUST BE SELLING EVERYDAY. You need to have both a sales and a marketing plan for your organization to improve your sales. If you are in Business to Business selling, you will want to check out our sister site Developing B2B Sales for information and guidance in the B2B World.

There you have the Non-Negotiable Challenges for the Stage One of the Growth Curve for Small Business. If you want more information or to discuss which stage you are currently in then contact Voss Graham. I am a Certified Growth Curve Strategist and look forward to helping you learn how to predict and solve the issues of a growth company. We help business owners to focus on Real Issues before they can negatively impact your company.

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Voss Graham

CEO / Sr Business Advisor at InnerActive Consulting Group Inc
Voss Graham is an Organizational Architect with 30+ years of experience designing sustainable business growth for organizations of all sizes. Creating the Strategic Focus with the Executive Leadership Teams, he uses Systems & Process to ensure the Drivers for Business Growth are Executed at the Highest Levels. Voss is available as a Speaker for your conferences or company meetings - contact him at 901-757-4434 or use the LinkedIn or Facebook direct messages.

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Voss Graham

Voss Graham is an Organizational Architect with 30+ years of experience designing sustainable business growth for organizations of all sizes.
Creating the Strategic Focus with the Executive Leadership Teams, he uses Systems & Process to ensure the Drivers for Business Growth are Executed at the Highest Levels. Voss is available as a Speaker for your conferences or company meetings – contact him at 901-757-4434 or use the LinkedIn or Facebook direct messages.