Terry Tateossian is a 4th generation entrepreneur, growth hacker, and co-founder of SocialFix Media.
getty
Starting a new business is like venturing into uncharted waters. This is what many entrepreneurs find thrilling and exciting. It is the call to adventure that makes you leave your safe harbor, give up who you are today and explore what's possible. Starting a new business is about leaving a world of familiarity and comfort behind to find your personal legend. But leaving your comfort zone and beaten paths can be a nerve-wracking and stressful experience, even with determination, planning and a creative concept that no one has ever thought of. The challenges faced by entrepreneurs are many, some being intrinsic and mostly associated with personal issues. Entrepreneurs also face external strains such as labor shortages, inflation and legislation for which there could be no solution and that a business cannot always control.
With many obstacles along the way, being an entrepreneur can be a tough journey. Yet, learning what challenges exist and how to identify them is the first step to entrepreneurial success. Based on my experience as a fourth-generation entrepreneur, here are some of the most common challenges I've seen entrepreneurs in America (myself included) face.
Internal Strains And Limitations
The success or failure of a startup often comes down to the personal traits, strengths and weaknesses of the entrepreneurs themselves. While there is no magical formula to start and grow a business, there are certain traits that budding entrepreneurs can cultivate if they want to be successful.
Successful entrepreneurs are not only creative but demonstrate good strategic thinking. They are able to work out the best way to utilize resources—money, equipment, skill and time—to achieve the desired outcome. Successful entrepreneurs are also good at evaluating progress and prioritizing tasks based on importance and relevance. They are able to effectively manage operations, cash flows, people and, in some cases, creditors, shareholders and investors. This requires strategic planning for short-, midrange and long-term goals and the ability to engage in market research, economic forecasting and decision analysis.
A lack of strategic thinking can have disastrous consequences as it keeps entrepreneurs from seeing important hazards and gaps. When an organization lacks focus and a holistic view of risk, relevance and value, this can result in unduly large investments, high cost of input, high wastage, inappropriate product mix or excessive manpower, all of which affect a business's ability to function and compete.
External Factors
The external challenges faced by entrepreneurs mostly come from environmental factors that they are not always able to control. Examples include inflation, labor shortages, financial and industrial regulations, taxation, and a volatile or competitive environment, to name a few.
Inflationary Pressures
U.S. inflation hit a record high in over 40 years, with prices rising at their fastest rate, including housing costs, food and gasoline. For entrepreneurs, this means that the raw materials, energy and goods they need for production are becoming more expensive. Inflationary pressures or rising interest rates also influence the cost and availability of capital and loans as well as customer behavior and buying decisions.
The extent to which inflation affects entrepreneurs varies depending on the services or products they offer, their target market and brand strength. Businesses that offer essential goods, for example, are less impacted by inflation than nonessential businesses. Customers will still spend on essential goods such as food and hygiene products and cut on nonessential spending such as dining out, entertainment and travel.
While such factors undeniably play a role and need to be accounted for, there are things entrepreneurs can do to weather inflation, like getting rid of money leaks, automating, changing their pricing model and repositioning their brand.
Labor Shortages
As evident from recent data by the Bureau of Labor Statistics, America's labor shortage is far from over. The quits rate is at 2.7%, with about 4.2 million Americans quitting their jobs as of November 2022.
As worker shortages are beginning to be relevant across industries, new businesses need to get creative with recruitment. One solution out of many could be to use alternative channels such as social media or freelance job platforms. Other ways to deal with worker shortages include offering flexible work schedules, starting an apprenticeship scheme and partnering with college job fairs and local organizations.
Financial and Industrial Regulations
An increase in the number and types of procedures that businesses need to comply with can have a significant negative impact on entrepreneurial activity. Examples can be increased property registration or licensing requirements that impose additional paperwork or financial burden on businesses.
While government regulation has expanded considerably over the years, there are ways to overcome regulatory challenges. For example, Airbnb chose to build government relations teams made of regulatory experts and lobbyists. Uber and Lift, which make up the bulk of the ride-hailing market in the U.S., chose which countries to launch in.
Small businesses don’t always have the resources to hire lobbyists and regulation specialists, but they can at least find a lawyer who can help them understand various legal issues. Topics that deserve the attention of startup businesses include corporate governance, privacy issues, intellectual property and client agreements, among others.
Final Thoughts
Most entrepreneurs would agree that nothing could replace the thrill of starting a new business. Taking control of your own future is both exciting and empowering. There is also power in seeking, trying and finding a solution that nobody else has. Even if your product is more mainstream, each day is a series of learning new things, problem-solving and finding out-of-the-box ways to do business.
Despite the many challenges, being an entrepreneur is one of the most rewarding and satisfying professions out there. And entrepreneurship is not just a money game. It is the satisfaction of addressing challenges and overcoming obstacles in new ways, whether in competition with others or oneself.
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