‘Start –up’ is the word creating buzz amongst the youth since decade now in India. Many young individuals in and around India have showcased their entrepreneurial talents in most effective manner by establishing their own brands. Any business idea to become successful requires entrepreneurial abilities to foresee business opportunities, gather required resources, meticulous planning and implementation. Along with these, one needs to consider uncertainty and challenges involved in the selected business category.
Below are some critical challenges that are faced while managing startups –
1) Idea conceptualization and implementation
Many people think that funding is the biggest challenge for a start-up, but more important than that is putting the idea into reality. It means making a blue print of the business plan. Building up a sustainable business model which will not just get idea into reality but it will help to generate positive cash flows in its future course. It is being observed that most of the times people with completely unique and great idea fail to be realistic and their business plan lacks feasibility. That is why implementation of the idea is as equally important as its conceptualization.
After working out a proper implementation strategy, next big thing is planning of financial resources. It is important to estimate how much money is required, how much money is needed at what stage, whether to raise capital by giving share of ownership to some angel investor or through availing the loan i.e. deciding amongst equity and debt etc. This depends upon the business model, whether there will be small margins with big volumes or large margins with thin volumes, distribution business or manufacturing and many more such factors. An entrepreneur must meticulously plan for arranging finance as it is the blood of any business. Many big ideas fail to sustain till it actually reaches tipping point because of lack of adequate financial support. Likewise some businesses have to change their core product or services just for making sure that the company survives. With this it may lose its original vision and model.
3) Human resources
It is said that money is not all that makes a business successful but the people in it. Finding out good employees is really a challenge now days. Another challenge is to make them stay with you for long, as good people easily find better opportunities. For any young startup, addition of every single employee is very critical. Good potential employees ask for high compensation packages which can be a challenge in terms of hiring as well as holding such talents in startups. Likewise sometimes properly trained and groomed employees choose to leave the job and start on their own. This again adds lots of cost in terms of hiring new ones or sometimes affecting existing business.
4) Market place
It is easy to start working on some idea but finding suitable target market and customers is really a big deal. It requires lots of research about existing business models, customer demands, existing products or services available, geographical characteristics, economic and trade policies, legal policies and lot more. A product or service needs to be structured after essential analysis of the above mentioned factors. Few months of pilot study in various geographies helps a lot to grab the pulse of the customers as well as market.After this, management needs to decide whether the product should be launched initially in specific territory or should be made available in selected cities or to be made available across the country.
With high accessibility and use of social media for marketing purposes now a days, positioning and targeting selected customer base has become very convenient. But it again becomes a challenge for start-ups as it is very costly to outsource it to the advertising firms. Hiring full time employee for social media management also can be a costly affair if it is not directly adding towards immediate results. Though costly, marketing is an integral part of start up management practices to showcase its product and services amongst target customer groups and to spread the awareness. This expense might be on a higher side at initial stages as it will reduce once the startup idea or brand becomes popular.
One of the biggest challenges faced by startups is the fierce competition. They need to be very cautious as well as aggressive while designing the market strategy. It is more a threat if one is entering into established markets or trying to establish oneself into existing product or service line. Growth in emergence of various online business models poses a threat to new as well as traditional businesses. Apart from this, they need to be flexible as well as innovative at framing various policies in terms of offering, pricing, technology etc. Strategic Partnerships can be one of the solutions for coping up with such challenges occurring from competition.
Prof. Tanay Kurode
Indira School of Business Studies, Pune