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  • 6 Common Challenges Startup Businesses Face

    6 Common Challenges Startup Businesses Face

    Common Challenges for Startup BusinessesAbout a million small businesses launch every year, according to the U.S. Small Business Administration (SBA). More than three-quarters make it to the two-year mark, but certainly not without grit and the ability to overcome the multitude of startup challenges entrepreneurs face. Whether you’re already wrestling with issues or want to prepare yourself for some of the biggest challenges in the startup journey, you’ll walk away with the insights you need here.

    1. Cashflow

    Poor financial management is one of the leading reasons why startups fail. According to research presented by the National Federation of Independent Business, Inc (NFIB), eight out of ten business failures can be traced back to poor cash flow management. To be clear, this is distinct from profitability. New businesses can be profitable and still fail due to cash flow issues by doing things like failing to collect on invoices in a timely manner or overspending based on their available working capital.

    Good bookkeeping is paramount here, particularly if you’re making good predictions about your cash flow. However, you still may find yourself in a bind if you face unexpected expenses or a large invoice goes unpaid for an extended period. Founders can also struggle during periods of rapid growth simply because you’re funding the cost of more orders, additional payroll expenses, and greater overhead with the limited resources you amassed before leveling up.

    It’s imperative to have multiple funding solutions to fall back on when this happens. It’s also wise to think beyond traditional lending, as just 44 percent of small businesses that apply for loans, lines of credit, and merchant cash advances receive full funding per the latest Small Business Credit Survey. Consider applying for invoice factoring. It works by giving you immediate payment on your B2B invoices and has much higher approval rates. Plus, you can typically choose which invoices you want to factor, so you can set it up and not use it until you need a cash injection.

    2.  Partnership Decisions

    Nearly 87 percent of nonemployer and 13 percent of small employer small businesses are sole proprietorships, meaning there’s a single person at the helm. Running a sole proprietorship may seem ideal if you’re not keen on involving someone in your business decisions or sharing the profits, but there are advantages to bringing someone else on board. For example, teams with more than one founder outperformed solo founders by 163 percent, according to First Round research. Seed valuations are also 25 percent less for solo founders, which can be a major sticking point if you’re trying to entice potential investors or making a case for other forms of funding.

    If you’ve already worked successfully with someone in the past, choosing a partner is easy, provided that person is eager to work with you again. If not, you still have options.

    • Connect with other entrepreneurs through local organizations to see if you can find someone who complements your skillset.
    • Explore working with investors who have experience and connections in areas you don’t.
    • Hire employees who might serve as cofounders and give them the opportunity to demonstrate their skills before bringing them on as an equal.

    3. Hiring Suitable Employees

    Hiring good employees is one of the biggest business challenges startups face. Unless you’re starting with a major chunk of cash, employee pay is typically going to be lower, there won’t be a swanky benefit package, and work/ life balance is often an issue. Adding to this, the most qualified candidates are all too familiar with the failure rates of startups, which can make them wary of even entertaining a conversation.

    Thankfully, you can overcome many of these challenges by highlighting what you can offer good candidates, such as rapid career growth and positive company culture. You may also want to include perks like stock options or flexible schedules.

    It’s also worth noting that your earliest people will need to wear many hats and serve specific purposes. Spend time evaluating your business plans and the types of people and skills you’ll need to get to where you want to go, then hire strategically to ensure each person is a good fit for your needs.

    4. Fierce Competition

    There’s undoubtedly fierce competition in every industry and learning how to deal with yours is key to business success. As a small business owner, it’s easy to get caught up in what each competitor is doing too. You may see one on social media and want to develop a following like they have or invest in product development to outdo someone else’s latest feature.

    The thing is, you can’t outdo everyone at everything. Each competitor has distinct advantages that have helped them get where they are. Instead of focusing on what they’re doing well, look more at opportunities they’re missing or areas in which your startup has an advantage over them.

    5. Finding Customers

    Finding customers fast is key for startup businesses. Your survival hinges on it. But, what can you do when you don’t have a massive advertising budget like your competitors?

    For starters, get familiar with your target market. Do research to find out who might use your products or services, what might motivate them to buy, and what stands in the way of them making a purchase. To start, you may want to focus on a group your competitors are overlooking or that you can make a unique case for.

    You can also attract new customers through an educational blog. Share helpful information on topics your audience cares about on platforms like Facebook and LinkedIn depending on where your target audience congregates. Research shows it’s equally important for a CEO to have an online presence too. Not only does it build bridges with employees, but will help humanize the brand and it will help with PR concerns, per Forbes research. In other words, just being active online will help address many of the common challenges you face and it’s easy to do.

    Ask for feedback as you grow your customer base as well. That way, you’ll learn more about what your prospects are looking for and identify ways to boost loyalty too.

    6. Time Management

    New startups are demanding and there’s only one you. Plus, you need time for sleep, family, and personal interests. Around 30 percent of entrepreneurs suffer from depression and 50 percent of those who hit that stage wind up with burnout, according to Entrepreneur magazine. Effective time management means giving yourself what you need to feel good and help your business down the path of success too. If you’re coping with small business problems, carving out the necessary time for things like sleep may fall low on the priority scale compared to something like making payroll, but when you manage your time effectively, you don’t have to choose. Consider these quick tips:

    • Delegate as much as reasonably possible.
    • Let go of the idea of perfection.
    • Outsource specialty work, such as bookkeeping and legal contracts.
    • Break up your longer projects into small tasks that you can accomplish in one sitting.
    • Create a schedule that allows ample time for tasks and stick to it.

    Address Your Financial Startup Challenges with Factoring

    Find yourself short on working capital due to increased sales, certain times of the month, or during slow periods? Invoice factoring may be the easy-qualify, no-debt solution you’re looking for. Learn more and request a free Charter Capital rate quote now.

  • Top 8 Reasons Why Startups Fail

    Top 8 Reasons Why Startups Fail

    It’s often thrown around that 90 percent of startups fail. Where does this number come from? Is it legit? And, more importantly, if it is, what can you do to avoid being one of them?

    How Many Startups Fail

    Small Business Startup Failure

    Sadly, this startup failure rate is accurate. Researchers from UC Berkeley & Stanford came together to create the Startup Genome Report a few years back, which revealed that 90 percent of startups do indeed fail, and it’s most often the result of “self-destruction” rather than competitive issues. While the scale may shift in that regard during difficult economic times, the data is clear. Self-awareness and education can go a long way in creating a stable and profitable company. Below, we’ll go over some of the biggest reasons for startups failure, so you can arm yourself with the tools necessary for success.

    Why Startups Fail

    1) Good Idea, Bad Business

    Many small business owners and startup founders start out with a fantastic idea they’re sure is going to take the world by storm but what they envision people wanting during product development and what people genuinely desire aren’t always the same. After postmortems with 101 startups, CB Insights found that 19 percent of companies failed because their products were not user-friendly.

    This is theoretically an easy fix if you’re actively requesting feedback from early customers and taking what they have to say to heart. However, 14 percent of failed businesses don’t hear their customers out, and seven percent don’t even try to pivot when they need to. A further ten percent don’t pivot well.

    “Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all,” say Startup Genome Report researchers.

    The bottom line: Listen intently to your customers and be ready to pivot and compromise to meet their needs.

    2) Expanding Too Quickly

    It’s easy to think of expansion in terms of adding more shops or products, but the Startup Genome Report lists several areas in which businesses may expand too rapidly.

    • Customer- Spending too much on customer acquisition and/or overcompensating on lack of demand with marketing and press.
    • Product- Building a product that doesn’t solve a problem, focusing on scalability before product-market fit, and/or adding features that are desired, but not needed.
    • Team- Hiring too many people, bringing in the wrong mix of people/ levels, and/or having more than one level of hierarchy to start.
    • Financials- Not having enough cash on hand to handle expansion and/ or having too much cash, which can result in undisciplined spending.
    • Business Model- Not having a business model, focusing on profit too early, failing to pivot, and/ or failing to examine goals and progress.

    The bottom line: Map out your own business plan ahead of time with clear benchmarks and metrics to meet. Schedule regular progress audits.

    3) Lack of Market Demand

    It’s easier to have a disconnect between product and consumer than one might think. “We had no customers because no one was really interested in the model we were pitching. Doctors want more patients, not an efficient office,” reported a patient communicator in a CB Insights postmortem. In all, their analysts found that 42 percent of startup failures involve a lack of market demand.

    The bottom line: Get to know your audience before launch and identify their pain points. Don’t ever assume you know what they are.

    4) Poor Marketing

    Many startups are so passionate about their product or service that they expect word-of-mouth marketing to create sales. The reality is, their audience may never even learn they exist. Others recognize the importance of marketing, but don’t have the systems and people in place to effectively handle marketing strategy, eventually hitting a wall they can’t overcome. Per CB Insights, issues like these contribute to 14 percent of startup failures.

    The bottom line: Have someone with marketing expertise on your team even at the early stages to help identify your target audience and how to reach them.

    5) Lack of Passion

    There is no denying entrepreneurs are a passionate group, but this passion can become all-consuming and kill work-life balance. Harvard Business Review reports that virtually all entrepreneurs say they experience some degree of burnout, and a full quarter define it as “moderate burnout.” As burnout sets in, passion dies down and so does the small business.

    Other times, business pivots take the startup in a direction the founder never expected. As the creator of a blog commenting system explained to CB Insights, “We didn’t really care about journalism, and weren’t even avid news readers.” This light-bulb moment occurred only after the product was launched, leaving the team to run a new business they had no interest in.

    Issues like these are present in nine percent of failures, per the postmortems.

    The bottom line: Pace yourself and be ready to move in new directions or bring on people who are passionate about what you do if it shifts.

    6) Poor Management Team

    Nearly a quarter of startups fail because they don’t have the right team, while 13 percent fail because of disharmony among the team and/ or investors, per CB Insights research. All too often, this comes down to the management—people placed in managerial roles who may not have the skills and experience to manage teams but do so because startup culture requires team members to wear many hats. Unfortunately, bad management spreads poor morale and damaging practices, which can infect the entire company.

    The bottom line: Ensure your managers have the skills and experience necessary to lead a team. Invest in training if you’re promoting from within or bring on external help if your existing team is unprepared for the role.

    7) Not Placing Enough Emphasis on Customers

    Ignoring your customers and what they have to say is a huge contributor to startup failure. User feedback is a vital part of the startup journey and should be prioritized throughout your business journey. Whether the feedback you receive is good or bad, you should always take it seriously. Good feedback tells you what you should keep doing within your business, and bad feedback gives you insight into what needs to change within your business. By keeping an eye on what attracts customers to your business and what deters them, and adjusting your business strategy accordingly, you can improve your potential client base and create a network of loyal, repeat customers.


    The importance of customers is not just about retaining and attracting new clients. Another common reason for startup failure is that business owners assume that, because they build an interesting website and have a good product or service, customers will come flocking. They forget to take into consideration the trust cost of acquiring the customer (CAC). Contrary to what many people assume, the cost of customer acquisition is actually higher than the lifetime value of that customer (LTV). You need to figure out a realistic CAC and then determine an actionable strategy to ensure that you acquire your customers for less money than they will generate.

    8) Running Out of Cash

    Close to one-third of businesses run out of cash, CB Insights analysts say. Some of this boils down to not having enough cash to begin with or failing to recognize the high costs of business development, but other times, it’s simply mismanagement of cash or struggling with cash flow issues, like slow-paying customers.

    The bottom line: Secure the funding you need in advance and have a backup plan to bridge the gap in case cash issues emerge.

    Get the Cashflow Your Startup Business Needs

    Whether your startup is light on working capital, is coping with growing pains, or needs funds to pivot, Charter Capital can help and contribute towards a profitable business. By leveraging invoice factoring, your company can get paid for its outstanding B2B invoices instantly—no more waiting on customers to pay their bills. Learn more about how invoice factoring works or contact us for a complimentary rate quote.