What Needs to Be Done to Avoid the Challenges of Starting a New Business Venture?

2021-07-02 05:18:32
6 pages
1612 words
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University of Richmond
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Despite the numerous problems involved in venturing into a new business, there are many financial and individual rewards in future. Entrepreneurs are faced with issues such as managing their time, inadequate capital to start and run the business as well as unfavorable business environment (Joseph, 2017: 1). As suggested by Evers (2003, pp 1), there are many challenges experienced by entrepreneurs in the United States in the creation of new ventures. Some of these ventures are terminated before 12 months from their establishment. Patel (2015; 1-5) states that over 9o percent of the new ventures end up failing.

Problem statement

Many types of research such as that done by Patel (2015) indicate that most new ventures fail or do not reach their intended purpose because of many problems such as accessing external financing, poor experience in management and poor balancing among the entrepreneurs. This research aims to establish what need to be done to avoid the challenges facing new ventures.

Statement of purpose

The purpose of this research is to describe how business startups entrepreneurs can avoid or deal with the challenges affecting new ventures and exploit new ways that enhance success in their businesses.

Literature review

Challenges of new business venture

Entrepreneurs of the new ventures are confronted with the difficulties of accessing finance and this creates a great impact on the growth and development of their start-ups. Economic data reveal that asymmetric data is essential to entrepreneurs as it helps them to obtain funds from external financers for their start-ups. In theoretical perspective, when circumstances of asymmetric information are combined with uncertainty for financers there are challenges of selecting or coming up with the profitable start-up and moral dilemma where the financers become concerned with what the entrepreneurs will do with the capital invested. In most cases, entrepreneurs in the USA tend to use their contribution to finance start-ups.

On the other hand, a significant number of investors tend to demand a more reliable and credible venture so that they can be assured of the returns of the amount invested. Most new ventures experience issues as they do not possess winning trading information records and may also not have enough experience and information on risk evaluation and assessment of their start-up (Evers, 2003). For instance, in the year 1996 the INC. 500 financed its venture by more than a half of the funds it raised indicating how hard it is for start-ups to access finance from external institutions(Evers, 2003).

Source: Alejandro Cremades (2016):

From the figure above bootstrapping is at the earliest stage within the valley of death where the entrepreneurs have the difficult time of accessing finances from the external sources (Cremades, 2016). They have to do everything to finance the start-up themselves. At this stage, entrepreneurs can also borrow from friends, individual savings, and family members. At some begin to experience hard times to convince Angels to lend them money to develop the business. It is until the business has winning records that it can attract mergers and other significant capital from financial institutions.

Moreover, new ventures encounter management challenges due to lack of experience. As a result, potential entrepreneurs who might be willing to enter the market are challenged by the lack of experience. There are instances when entrepreneurs may have some experience such as networking and communication skills to manage their business from previous jobs. However, such experiences cannot be compared to those who have settled in the market and still have experience from their previous jobs (Paunescu, 2013: 73-74).

Also, entrepreneurs encounter the problem of identifying the right group of employees how to mobilize them to work as a team, as well as the best way to utilize leadership and the manner to resolve the conflict. It can be very challenging for entrepreneurs especially when it comes to new and complex tasks of the new venture. Unless an entrepreneur has some previous experience or enjoys strong support from a franchisor, he would require learning and understanding of a lot of business concepts in a short period (Joseph, 2017).

Moreover, startup entrepreneurs face the challenges of balancing and managing time. In most cases, new ventures owners may decide to do everything by themselves because they do not have adequate funds to hire workers. Apart from that, they might also engage in activities that may not be fruitful for the venture thus wasting most of their time. Sometimes startup entrepreneurs may overwork themselves resulting in the imbalance that causes stress and other health issues. Moreover, they might end up developing negative relationships with family members just because of lack of time to spend with the family members.

Solutions to the challenges of the new business venture

There are some solutions that can help avert the challenges encountered by startup entrepreneurs. For instance, entrepreneurs can avoid the issue of inadequate finance by expanding capital source. They can increase contributions by reaching out to more friends, family members and can increase their savings by cutting down other personal budgets. For example, to reach out to the external financers, the entrepreneur needs to write a strong business proposal which can easily convince angel investors and financial institutions to invest in the business.

Issues of lack of management experience can be solved by entrepreneurs enrolling in management classes and employing employees with extensive management experience. As such, the entrepreneurs will have fewer problems and conflicts in managing their startups when they have management experience.

Finally, entrepreneurs can solve the challenges of time management and imbalance by having the schedule with the clear elaboration of what to do each hour each day at the business premises. Moreover, the entrepreneur should set some time aside for his or her family members.

Research methodology

The research has made great use of qualitative research approach. The research will consult credible sources about solutions to challenges of new business venture. Applicable case studies will be synthesized and compared to ensure that this research is well- informed. The study has also employed quantitative research design data to gain an understanding of why businesses fail to succeed at the initial stages after inception. Data from secondary resources that contain illustrations of businesses that have failed and those that succeeded in the past will be used. Interviews have been conducted on successful businesspersons who have thrived in the area of starting up a business. Some executives who lead successful firms claim that success of a business depends on the number of hours and patience of an owner to nurture their idea to maturity. Challenges occur along the way, but the most important lesson is learning how to withstand and encourage oneself throughout the initial stage when the business has not picked up. Employing the right people who are committed to success and willing to stand with the business also contributes to the rate of success. Partnering with the right people in the business will motivate the organization to pick up within a short time.

Research Analysis

The collected data will be analyzed and presented through presentation tools. Data collection is conducted through interviews to various successful entrepreneurs. The data is collected through video recording, field notes and images .the main aim of the interview is to explore and understand why most businesses fail almost immediately after they are started

Research Results and Discussion

The research results and discussion used diagrams and figures to represent data collected from different sources that illustrate the challenges people face when entering into new businesses. The analysis also highlighted the rate of success of new companies and tricked the entrepreneurs used to attain the high levels of success. The details and explanations have expounded challenges that the management of business ventures go through during through challenges. In essence, some of the challenges that organizations face during their startup stage include lack of enough capital to take care of the recurrent expenses, which drain the profits of an organization, management problems, and making miscalculated steps by the entrepreneurs. Moreover, the other business challenge is that the business may lack enough money to help them improve their business.

Alternatively, there are solutions that these business startups have faced during the startup stage. Among the solutions include sourcing enough money at the beginning that will help cater for all bills before the business can gain stability. Also, another solution is getting professional help if possible to manage a business or investing more extended hours to oversee the activities of the firm. The business owner should first research about the business they will start before execution of their dreams and understand how it functions. On the other hand, the business owner should have collected enough money before starting out so that they can have the cash to take care of emergencies that arise when one starts operating the business. Networking and communicating with other like-minded people in the industry will assist the organization to pick up within a short time after starting operations

Conclusion

In conclusion, most people start the business with the hope of gaining profits and improving their standard of living. They save their income, request for friends contribution, family donations and borrowing from financial institutions. The issues are that most start-ups experience difficulties with accessing enough capital to start and develop the business. Most of the capital is sourced from personal contribution and family help, which is far from enough to start the excellent business. Accessing loans from financial institutions becomes hard because these organizations look for business success records before lending. A new venture has no such records. Another issue is that they face difficulties with management experience and balancing between business and family. Therefore, there is a need to perform a proper background check on a business that an entrepreneur intends to start so that they can reduce the possibility of failing when they actualize their idea.

 

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