Problems Facing New Entrepreneurs

Problems Facing New Entrepreneurs



A new or young entrepreneur is an individual who starts and runs a business with limited resources and is responsible for all the problems and rewards of his or her business venture. They may be faced with unexpected problems that they neither foresee nor prepare for which may lead to the collapse of their respective business initiatives shortly after they start.


Entrepreneurs are usually engrossed and excited with their ideas especially their new or innovative goals to such an extent that they hardly consider risks inherent in what they are trying to do.  Research has shown that about 50 – 60% of entrepreneurial ventures or small businesses will fail in the first 5 years of their commencement. However, it has also been established that about 60% of the entrepreneurs who failed in their first attempt will succeed in the second attempt.


The possible problems leading to the failures of these young or new entrepreneurs in their first attempt will be our focus here (part 1) while suggested solutions will be treated in the next posting (part 2).  Most of the problems discussed below were obtained from experienced but articulate Entrepreneurs who were honest enough to discuss with us.  Some of them have moved on to set up thriving businesses.


  1. Feasibility Study

Once an idea or concept is developed, it is necessary to test whether the idea can work or not.  That is the essence of the feasibility study.  Due to inexperience, many young or new entrepreneurs consider a feasibility study as a mere academic exercise.  They simply dive into the business without preparation for the operational, economics or technical, problems that both tests would have revealed. Ignoring this foundation is a recipe for failure.

  1. Business Plan

Just like “feasibility study” many young entrepreneurs ignore the business plan.  But the plan normally details how the idea can be turned to reality, explain the product or service and show the breakdown of how to develop and organize the business. Failure to do this can lead to failure because the young or new entrepreneurs will not be able to know how to navigate the rough road ahead.


Problems Facing New Entrepreneurs

  1. Find capital or financing

Two major problems are associated with this.  The first problem is related to the business plan discussed above.  Angel Investors i.e. providers of soft loans or gifts, banks, or friends who want to help usually want to see the business plan.  Without a business plan, the young entrepreneurs may have to depend on his / her funds which can be inadequate for a proper takeoff.

The second problem is that some young entrepreneurs are too secretive or arrogant to ask questions from friends, a loan officer in a bank or a known financial adviser on how to raise capital.  In the process, they may end up securing high-cost money from a Finance House.

  1. Arrogance

    This problem is difficult to handle by a talented but young entrepreneur. It can take the following forms:

  • Size of business: It is better to “start small” and expand gradually but some brilliant entrepreneurs want to “start big”!  Starting big can lead to a quick exit.
  • Rude or bossy attitude: – The pioneer staff, customers, vendors, and other stakeholders should be treated with respect and not “rude” or “bossy” attitude which some young entrepreneurs are imbued with.
  • Leadership skill: – Most young or new entrepreneurs do not pay attention to this attribute.  Young or old members of staff are always looking up to the entrepreneur as the leader.  If he or she lacks the skill to influence them positively, the organization can have stunted growth or fail.
  1. Recruitment of the pioneer Staff.

Human resources problems can manifest in the following forms:

  • Recruitment error. employing the wrong person for a particular position e.g. hiring a “bee” (someone who likes to sit down in the back office to work with figures) to do the job of a “butterfly” (someone who does marketing job i.e. go out and meet buyers or create markets for the products or services).  If the entrepreneur cannot figure out the solution quickly, it may be the beginning of the end of the new business.
  • Ego recruitment. hiring people with higher degrees and high pay to handle jobs that can conveniently be done by low skill employees with lower pay.  This is usually done by young entrepreneurs to show off but it is a disguised problem that will hunt the small business when the cash flow is not buoyant.  Asking the person recruited wrongly to leave without concrete reason may lead to litigation or some customers may follow him or her to the new employer.
  • Recruitment of a contrarian:  Hiring someone who does not share the vision of the founder at a high level is dangerous to the new business. Such a person will not give his or her best always.
  • Recruitment without background checks. This can lead to hiring a pilferer or fraudster.  Anyone of them that operates alone is very difficult to detect.  They are usually smart and often apply “termite philosophy i.e. gradual stealing” to destroy the new business before they leave to find a new conquest or victim.


  1. Weak Marketing

Many young entrepreneurs have great ideas and are excellent in turning ideas into products or services.  Often such entrepreneurs have no problem in attracting personnel that shares their vision.  But the products or services that come out of their efforts must be accepted by the people, paid for at the level that can sustain the entire staff and leave a profit before everyone can talk of entrepreneurial success.  This is where marketing kicks in.

Inability to market the products or services can end the entrepreneurial efforts. The marketing mix of products, place, people, price customers, and cost must be analyzed and the respective result must be positive for the product or service to have a chance.  The following are the key problems that usually confront the young entrepreneurs in this regard:

  • Expert marketers may be too expensive for the products or services.
  • The tools required to market the products may be too expensive for the entrepreneur e.g. access to computers and cost of data for online advertisement.
  • Competitors’ superior marketing structure can be a threat or lead to outright de-marketing of the new business from the market place.
  • Entrepreneurs’ weak networking skills – a new business need high networking and smart marketing.
  1. Greed Factors

Greed is a big problem for humanity.  According to Gandhi, “there is enough in the world for all our needs but we do not have enough for our greed”.  Many entrepreneurs are naturally greedy but only a few usually admit this because they can explain their actions as using profit maximization strategies.  Below are some of their actions that may put an end to their respective businesses, however promising.


  • Low-quality product or services to cut cost and increase profit.
  • Delay in paying staff salaries and wages or paying ridiculously low salaries to maximize income.
  • Evading or avoiding paying relevant government levies or taxes.
  • Use of outdated technology (when the business can afford the right technology).
  • Use of family member for a sensitive job to save cost.

The business world is exciting and rising to the top is delightful for Entrepreneurs.  But it helps to give thoughts to the above issues before starting.

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