10 Obstacles Every Startup Must Overcome to Be Successful

UPDATED: May 28, 2024
PUBLISHED: July 23, 2021
10 Obstacles Every Startup Must Overcome to Be Successful

The odds of survival for a startup are daunting at best. Nine out of 10 startups fail in their first year. Failure is so common, in fact, that many entrepreneurs have taken to penning failure post-mortems to determine where things went wrong, in the hopes that others will learn from their mistakes.

Despite the odds, we keep at it. Perhaps it’s for the love of the business. Perhaps it’s the desire to create something that’s our own. But it’s also because we believe that we’ll be part of the 10 percent who succeed. There’s always a need for companies that are innovative and meet customers’ needs, and we’re sure that we have what it takes.

Do you have the chops to get your company over the hump? After building my startup, Owlmetrics, an Instagram analytics tool, I realized that there are 10 obstacles every startup must overcome if it’s going to become successful. Here’s your chance to determine your weaknesses and build on your strengths.

1. Strong Leadership

In order for a startup to muster the Herculean strength it will need to succeed, it must have determined leaders willing to put in the hard work to see it through. But don’t confuse being a strong leader with being a hierarchical, authoritarian boss.

Good leaders understand the need to hire the right people, and to delegate and trust those people to do their jobs. They understand the need to develop synergistic partnerships and collaborative relationships. They believe deeply in their business and they continually work to develop their vision for the company’s future.

Leadership is especially key for a startup, as everything about the company is coming into focus. It’s in an extremely volatile state. Strong leaders are the decision-makers, idea generators, team builders and image-makers for their company. If you stand at the helm of a young company, you play a crucial role in all these areas. In short, the rest of the advice below is worthless without a strong leader showing the way forward.

2. Thriving in a Competitive Market

No matter what type of business you go into, your startup is in a contest for survival. Fierce competition is either going to drive your startup forward, pushing you and your company to new heights, or it’s going to eat you for lunch.

If you want to avoid being made into sushi, you need to learn to thrive when facing direct or indirect competition. In fact, research shows that learning to thrive in the “red ocean” of competition will strengthen a startup for long-term survival.

Competition forces young companies to focus on customer needs and keep costs lower and contained. It also opens up opportunities that young companies can take advantage of. In the rocky waters of a competitive marketplace, no one has the luxury of hanging out in the shallow end on a life raft. It’s sink or swim, so you’d better be ready to start paddling from the get-go.

3. Tapping the Right Talent

If you’re a strong leader, you already understand the importance of hiring suitable candidates with the right background, skill set and personality to competently do the job. But it’s not just about hiring the right people; it’s about putting together an exclusive team that can work together, feed off of each other, reel each other in when necessary, and remain excited and focused on the task of launching a successful business.

As you go through the hiring process, remember that these are the people who will make or break your startup, so be careful and discerning. The hiring process takes valuable time away from your business. Your goal should be to spend that time wisely so you don’t have to do it again in short order. Narrow your search by prequalifying candidates through thoughtfully written classified advertisements that specify exactly what kind of applicants you are looking for.

Call references. Have candidates meet with other team members to see how they fit in. If you create the best team possible up front, you will save loads of time and money in the long run.

4. Sustainable Expectations

Your startup has attained a measure of success. Things are looking up and sales are skyrocketing. The sky’s the limit, right? It may be tempting to assume business will continue to exceed your wildest expectations. Here’s your reality check: Good times don’t last forever.

Even when things seem to be functioning flawlessly, it’s important to keep a cautious mindset. If you assume things will always be good, you are setting yourself up for failure. Sustainability requires consistent effort and hard work. You can’t coast on your past success or rely on unrealistic growth potential.

No matter what your business, you have to be prepared, keep working hard and understand that even if you are thriving now, the competition is nipping at your heels. True success is not attained only when everything’s going your way; it’s also about what you do during the lean times. It’s how you achieve sustainability over the long haul.

5. Budgeting and Financial Woes

If there is one thing that seems to plague most startups, it’s cash flow. It’s easy for a young company to get bogged down under financial stress and pressure. Unexpected expenses and emergencies pop up. Sometimes you appear profitable on the books, but in reality, you are waiting for clients and customers to pay you. The bottom line is that most startups aren’t bringing in much in the way of income—at least at first—so paying the bills and finding ways to grow to scale are ongoing problems.

Careful budgeting and pre-planning are key to getting over this initial financial hump. Write your cash-flow projections and come up with a business financial plan. Knowing what you can reasonably predict in terms of expenses and income will help you plan and spot problems sooner.

Consider speeding up your cash-flow timeline by requiring faster payment on invoices. Another option is to require customers to make a down payment for goods or services.

6. Defining Your Product and Your Niche Market

For many new entrepreneurs, deciding what kind of product or service to focus on is the first major hurdle in launching a business. This is especially true for e-commerce entrepreneurs, who may struggle to decide which niche market to focus on.

On one hand, there are so many potentially prosperous niches out there, it’s hard to know which one to devote your time and energy to. All the good ideas have been done, so how do you compete and stand out in a crowded marketplace?

Now is the time to get down and dirty with research and introspection. Here are some things to consider when defining your product and market:

  • What kind of customer do you want to do business with?
  • What are your interests, areas of expertise and experience? Your niche should come from an area you are naturally interested in.
  • What are the emerging trends you can capitalize on?

Keep in mind that whatever you do, it should be with an eye toward building a unique brand.

7. Understanding Your Customers

Winning customers’ trust is paramount in any business if you are to build a loyal customer base. This is what all startups seek to achieve. But here’s the thing: No startup will sell to all customers. Not everyone will be interested in purchasing your product or buying your service. In order to be successful, you have to know who your customers are and how to best reach them. For many, this starts with creating a strong email marketing strategy.

It’s not enough to know how old your customer is, their gender or education level. Understand what motivates them, what they hope to accomplish, and what challenges or barriers they face. Talk to them to get a sense of who they are. Consider creating a customer persona, a semi-fictional character that represents a generalized ideal customer. This can help you see who your customer is more clearly, so it’s easier to find them.

8. Marketing and Branding Yourself

Every company has a personality. This is more than just a logo and a catchy slogan or tagline. It’s what that company stands for, how customers see it and what draws people to it. But startups often miss out on this because they overlook the importance of advertising and marketing. Marketing, branding and advertising play a big role in how a company creates its identity and how the outside world perceives it.

Getting a jump-start on marketing and branding will help a company establish its brand identity, and this is huge when it comes to differentiating itself from the competition.

Branding requires a company to understand its customer base and then articulate what makes it different or unique from the rest. Branding should be part of a startup’s vision from the beginning. It also gives customers a sense that the company is here to stay.

9. A Well-Defined Vision and Goals

If there is one sure thing that all startups face, it’s constant change. It’s like trying to jump into a long-distance relay race that began ahead of you, with a team you’ve never practiced with before. In order to succeed, you’d better know early on where you are going. Otherwise, you’ll be lost before you begin.

A well-defined vision is a turbo boost to getting across the finish line. It allows you to set goals that define the path you plan to take and how you envision your progress along the way. A strong vision, along with clear-cut goals, will give you a strategy for achieving success.

Use that to develop a solid internal structure and you’ll have the “muscles” to get where you want to go. Start by creating a mission statement, which declares where your business is headed and what you expect it to look like when it arrives.

10. Time Management

In the midst of dealing with all the countless decisions and issues that it takes to launch a company, it can be easy to feel like time is the enemy. There simply isn’t enough of it to accomplish all the tasks that must be done in a day. Learning to properly manage time is crucial to staying on task. Working smarter not harder sounds great, but is it really possible?

It is, but only if you stay focused and find ways to cut out time-sucks, maximize your productivity and know your limits. Make sure you pick a weekly goal, something that you want to accomplish over the workweek. Just as defining the overarching goals for your company will help see the big picture, picking smaller, bite-sized goals to tackle each week will help you stay focused on what’s important.

Finally, make sure to take breaks. Stretch your legs with a walk. A short mental break will actually help you be more productive. It can give you the space you need to make better decisions and enable you to be the best leader you can be.

This article was published in November 2017 and has been updated.
Photo by BublikHaus/Shutterstock

Deep Patel is a serial entrepreneur, marketer and investor. He is the founder of the wellness brand Penguin CBD. The company was rated the #1 CBD brand of 2020 by Snoop Dogg’s Merry Jane and was acquired in May 2021. Patel also worked with companies like Cellucor (maker of C4) and A.T. Kearney.