Startup growth challenges are many. In the initial stages, start-ups desperately try to establish themselves and make a mark in the market in which they operate. Entrepreneurs invest a lot of their time, treasure, and energy into securing investments believing that this will make their companies successful.
Finance seems to be the most commonly perceived challenge to startup growth challenge. They look to Angel investors, friends, and relatives to support them in their formative stages. While the need for money cannot be wished away, I believe sustained business growth is a sum of multiple factors. Unable to bring these factors together, a majority of startups fail.
There are many reasons why startups fail, but some common causes include a lack of market need for the product or service, poor management and leadership, lack of funding, and competition. Additionally, many startups may lack focus or have a flawed business model. It’s also worth noting that even with a great idea and team, execution is still key, and many factors can play a role in the success or failure of a startup.
There are cases where failure occurs, even in cases where the market need is clear and competition is not a limiting factor. Over-enthusiasm and an unsustainable pace of growth can lead to poor quality controls, which can cause customer dissatisfaction and destruction of the market base. Companies must focus on building business processes and organizations to ensure customer satisfaction.
Startups can face cash flow problems when receivables are not received promptly. In these cases, growth occurs, but cash flow problems arise. Such companies take short-term debt at high rates leading to debt buildup and ultimate unsustainability. I have seen many such cases where startups are unable to scale up. Mismatches between business acquisition and delivery are seen, and rapidly these companies enter into an unsustainable descent to oblivion.
These growth challenges can be overcome if entrepreneurs invest time in developing a business strategy that meets their business objectives. Commensurate to the business strategy and objective, the startup selects the business model. For instance, an IT SAAS company could decide to adopt the platform model or a Freemium model. The selection of the business model should be a deliberate exercise. A business model should be subjected to a stress test before rollout.
Startups’ growth challenges can also be reduced by investing time and energy in building the brand name of the company.
Business growth is a function of strategy, business model, marketing, and organization operating model. A start-up that takes care not to commit some of the mistakes outlined above has a greater likelihood of growing and building into a mature full-fledged sustainable business.