3 Problems Small Businesses Face in The First Year, and Solutions

Here’s a dismal fact: About 20 percent of businesses in the US fail in their first year, according to the Bureau of Labor Statistics.

Here’s something more reassuring: Many mega-successful businesses like Starbucks or Ben and Jerry’s started small.

The first year (or two) can be turbulent for any business, never mind how experienced its founders are. Several challenges emerge at this time, from financial setbacks to labor shortages. Surpassing these limitations is imperative to survive and thrive.

Here are three challenges that may get you down when you start your company, and ideas to get past them.

1. Needing Money to Make Money

Financial difficulties are a staple in a small establishment’s first year (unless your pockets are bottomless). You may struggle to find investors who believe in your idea enough to part with funds. Funding everything yourself can make it tricky to manage necessary investments in technology or inventory.

The problems may go on for a while even after you secure funding. Cash flow troubles plague many small businesses. Your sales may be low, but expenses can multiply with time.

What you can do:

Networking remains a dependable way to acquire funding. You can find financial and mental support from mentors and fellow professionals. Attending industry events and reaching out to like-minded folks on platforms like LinkedIn can give you a head start. These activities can open up routes like venture funding and private equity to raise more capital.

Another option is to pursue equity and debt financing from an SBA-regulated company. The Small Business Administration can assist small businesses with funds, often providing more generous terms than traditional options.

It helps tremendously to have a clear business plan with a pitch deck. Having paperwork in order builds trust and confidence in those who decide to invest in you. Spend time getting your credit history and personal finance statements in order if you plan to depend on bank loans. Their approval will hinge primarily on your credibility and record.

2. Struggling to Reach Audiences

Starting a new business may seem like a brilliant proposition when you have support from your family and friends. Alas, many entrepreneurs soon realize that the audience’s awareness or interest does not extend beyond their immediate circle.

Marketing can be a significant challenge for first-time business owners. It requires a thorough knowledge of the market and customer preferences and the ability to use various tools and media. Inexperienced business owners may waste valuable resources and fail to reach the desired target audience.

What you can do:

Consider technological advances that can help you formulate effective but budget-friendly marketing strategies for your business.

For example, you can let artificial intelligence guide you in creating a website for your company. According to Hocoos, AI is now capable of helping business owners generate customized websites without any web design or development competency.

Forbes notes that websites remain a prime platform for businesses in this post-COVID world, with 71% of companies having one. A majority of people judge a business’s credibility from its website.

Spending time drafting a marketing plan covering social media platforms can also have good payouts. Some reports indicate that many small businesses prioritize Facebook and TikTok for marketing.

However, following a well-thought-out content plan is vital to make the desired impact. You can consider working with interns or freelancers experienced in social media marketing to understand the full potential of these channels.

3. Not Finding People for Various Business Functions

As a small business owner, you will struggle to acquire the appropriate people for key roles in the first year. Attracting and hiring the right talent for functions, like operations and specialized roles, is an ongoing struggle.

The Atlantic observes that the current job market in the US seems to be frozen. More people are apprehensive about switching roles unless they find adequate security and assurance for personal and professional demands. Globally, too, an unwillingness to experiment professionally can lower productivity and innovation.

This challenge may lead to suboptimal hiring, which affects the quality of your offerings. Alternatively, some founders may take on too much responsibility, failing to delegate and getting fatigued and stressed.  A Ramsey Solutions survey finds that over 40% of small business owners experience burnout and feel alone in tackling urgent problems.

What you can do:

The best way to address this scenario is to tap into referral networks and start word-of-mouth hiring. You may need to compromise on the expected skills or qualifications to an extent, but on-the-job training can have excellent results.

Small businesses can highlight incentives to find skilled employees who may choose among several options. The salary you can offer may be limited, but perhaps you can provide better flexibility and a more innovative culture.

Every year, many entrepreneurs take the leap of faith and pursue their dreams. Thoughtful, purposeful businesses have the power to drive societal change and impact communities positively in these mercurial times.

Maintaining a clear vision and applying strategic solutions to challenges can help business people navigate the fog of the initial phase. It’s a learning curve that leads to bigger, better things.