Common Challenges of Starting Your Own Business
Granted: starting your own business can be endlessly exciting. It’s a new and alien concept. You’re filled with the motivation to bring your product or service to the world as quickly as possible. However, starting your own business isn’t as easy as one might expect. Here are some of the most common challenges that first-time business owners face.
Motivation and Momentum
As a business owner, everything is on you. You get to set your own rules, your own hours, and the way in which your business operates. This is certainly freeing, but it also means that you need to stay constantly motivated to keep your business afloat.
There’s no boss or a massive team around to motivate you every day — the motivation and momentum for your business have to come from within. Essentially, if you’re not passionate about the business you’re starting, it can be very hard to prevent that initial flame of passion from fizzling out. Below are some of the most common challenges that new entrepreneurs are met with whilst starting their very first business:
Regulation and Mandatory Training
This is a huge hassle in regulated countries (such as Singapore) where you have to acquire several licenses and pass a few tests before opening your business. Taxes, licenses, and regulations can become an operational burden since they take a huge chunk of time away from your day which could have, otherwise, been put into something like research or development.
For example, if you want to start a food stall in Singapore, you need to get a food shop license and pass several tests which include an in-house training session. In fact, many small business owners make the mistake of not checking up on which regulations they need to abide by, which can result in them being shut down abruptly.
Source: Kelly Sikkema
Finances and Money
By far one of the hardest parts about starting your own business is the acquisition of finances. Since it’s likely your first business, you don’t have an existing revenue stream (other than your full-time job, which you would have to leave so that you can dedicate your time to the business). Without a proper source of finance, a business simply cannot run.
Analyzing Your Business Model
Before you jump into starting your own business, it is important to perform an analysis of certain important factors that can predict your success in the market.
Analyzing market risk is important for starting your own business since it can prevent you from losing large sums of money. This involves scoping your target market in order to figure out the risk of your business failing or succeeding. Here are two great ways to do this:
Understand the competence and popularity of your competition
If there is strong competition in your business niche, it becomes much harder to open up a new business. It means that the market shares that are up for grabs have already been captured by large businesses.
Larger firms often put up barriers to entry for small businesses which can make it much harder for you to start your own business. They can sign exclusivity contracts with popular suppliers and can use price-cutting strategies (thanks to their power in economies of scale). The more powerful your competition is, the harder it will be for your business to truly take off.
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Your product must match your demographic
Every product has a target demographic, and the two must align. If you’re selling sporting goods or school material, the place you’re selling must have a lot of young people — it becomes harder if there’s an ageing population, or if you’re not doing business online (via a website or social media). The platform in which you sell (whether this is online or offline) should be tailored to who you’re trying to sell to.
This also ties into the idea of demand — for a product to succeed, there must be sufficient demand for it. Sure, you might like raisin cookies, but if it’s not a popular product amongst the existing market, then as a business, it may likely fail. A business which sells a good or service that does not have sufficient demand runs a very high risk of failing. It’s key to perform a pilot test with a small number of products to ensure that the product matches both the demographic and the market’s demand requirements.
Financial Planning for Your Business
Ultimately, finances make your business tick, and you need to plan them carefully. Without a proper financial strategy, your business could go under because you won’t have enough assets to cover your outstanding liabilities. Listed below are some things to keep in mind while creating a financial plan for your business:
Never take on too much debt at high interest. If the business doesn’t go as well as planned, you will be stuck with high-interest loans that will keep compounding over time. This is a really bad position to be put in.
Keep supplies light and scalable
Don’t buy a huge warehouse or lots of machines immediately. Invest in the capital that you require to maintain the business at its current level, and purchase more capital as business needs grow. This way, you don’t needlessly waste your finances.
Have a reliable line of credit
You may suddenly get an order from a big client or may need to pay rent while having orders out. Even if you manage cash flow properly, these surprises can be hard to combat without having funds. This is why a reliable line of credit is extremely important — it allows you access to cash as and when you need it.
Use strategic pricing
Think about the price elasticity of demand for your products. By tracking this figure, you can maximize your growth by changing the price. Certain factors of your products (including how necessary they are) may allow you to actually make more money by dropping the price since the increased demand would make up for it. Likewise, by increasing the price, you can also make more profit if the product has a low price elasticity of demand (for example, sugar, water, and other necessary products).
Source: Tierra Mallorca
Sources of Business Finance
Since finance plays a massive role in operating a small business, it’s key to understand the options you have available. Here’s a simple breakdown of the most popular financing options:
Your personal funds
This method is entirely interest-free, but you run the risk of going broke if your business fails.
A credit card
You can borrow money from the bank via a credit card, but don’t be late — credit cards tend to come with exorbitant interest rates if you miss the due monthly payments.
This is a great way to raise large sums of money without too much risk, but it’s a hit-or-miss — many projects simply never get funded and remain unseen.
A business loan lets you borrow large sums of money with terms that are flexible and tailored towards you. Credit Hub Capital offers flexible business loans in Singapore with some superb options. Compared to a credit card, the interest rates are extremely low. Learn more about Credit Hub Capital’s loans for small businesses.
Ultimately, out of the available options, a small business loan seems to be the best as the interest rate is relatively low and you don’t need to risk your own personal funds in any capacity. There is also a much higher chance of your funding is successfully secured. If you’re looking for one of the best places to get a small business loan in Singapore, Credit Hub Capital is one place to look for. Please feel free to contact us if you are in need of a small business loan that helps you in starting your own business.
Featured Image: Helloquence on Unsplash