The top 3 biggest and smallest problems faced by startups – and how to avoid them


The top 3 biggest and smallest problems faced by startups - and how to avoid them

The urge to start a business is a common one, and indeed with formation services like our own it’s extremely easy to do. However, the process of building a business is a lot more involved than the initial impulse to form a company.

We’re always keen to provide our customers with as much information and support as we can to help make a successful business. Part of that means that there is a large amount of business advice and knowledge we like to explore and present – to give our customers the maximum chance of success.

Every new company will face issues and challenges once they have formed. But what are some of the more common ones – big and small? In this post we will explore these in a bit more detail so that when you choose a package and form your business with Company Formation MadeSimple, you’re that little bit more prepared.

Biggest Problems

The biggest problems in business are often the most unpredictable. You can prepare for the problems that you know about – but there are some that you might not even think are initially that important but ultimately turn out to be.

It’s all about preparation and making sure that you are as ready as you possibly can be. Jayson Demers, CEO of web marketing firm AudienceBloom, wrote for in June 2015 that “While many new entrepreneurs convince themselves that their businesses will be different and their people will all be thrilled to work there, the reality is most business owners are unprepared for the rigors of successful management, and end up making critical mistakes”.

So the reality is that most entrepreneurs will forget something. With that in mind, here are some of the biggest problems that you might not have thought about.

Business Planning

You might be saying “Wait, what? Of course I’ve thought about business planning, what kind of entrepreneur would I be without having done that?”. Well, of course you’ve done thorough planning – but there are some often unseen elements to business planning that many startups don’t address. So it’s best to be aware of them.

  • Thinking Too Big – Believe it or not, being conservative is a good idea for most companies, especially if you have an idea that is quite lofty. Everyone wants to be the next Twitter, but it might not necessarily be too healthy to think you will. Think smaller and set more realistic goals, then if you exceed them – fantastic! It’s fine to be ambitious, but make sure your goals and milestones are realistic – otherwise you may disappoint.
  • Not Assessing Competitors Properly – Any business needs to have a solid view of the business landscape around them, but it’s remarkable how many don’t properly research. This is crucial to knowing where you stand as a business. That unique idea you have might not be so unique after all. Mark Evans wrote for Forbes that being unique is “not easy” and “There is so much competition that startups have to be creative, flexible and bold”. So be aware of this and don’t underestimate the importance of competitor analysis. It’s worth pointing out that doing company searches is a great way to do that.

Business planning often includes marketing considerations, so these are also important to be aware of. But generally speaking there are a lot of different ways of making an impact with a solid business plan so you must make sure you’ve considered every eventuality – especially the two less commonly considered ones mentioned above.


You might think your product is so good that you won’t even need funding beyond initial costs of formation. But the reality is that you probably will need a more concrete plan than that, but it’s a common and important issue faced by startups. Consider the following to help alleviate the problems of funding:

  • Private Funding – You might want to go it alone, but if you’ve got a good idea you can resolve the problem of funding by finding private investors to help you with costs. There are many out there including the Barclays Accelerator program that can help startups. However, there is often stiff competition from private funding programs so your idea and business plan must be first rate.
  • Public Funding – A good thing that the government has done for business in the UK since the global recession of 2008 is making money available for the development of small businesses. The Seed Enterprise Investment Scheme is a good example of this. Competition is less fierce for public funding as some of the scheme focuses on tax relief and other incentives for which many businesses are eligible.

Of course, there is the option for self-funding as well. Many entrepreneurs supplement their business costs with income from another source, such as other employment. Nonetheless, funding is one of the biggest and most significant challenges faced by startups.


This is somewhat related to funding, but really it’s an entirely separate challenge. If you don’t have enough cash to pay suppliers or other expenses in your company you will find progress grinding to a halt – and actually potentially going backwards too! Consider the following to alleviate cashflow problems:

  • Supplier Relationships – If your business is dependent upon a supplier, you need to have a good relationship to make sure you get the supplies you need to provide your product to customers. If you’re not sure about a supplier, then doing a company search on your supplier to establish their credit rating and limit information is a good way to ensure there a level of reliability that is important to cashflow.
  • Late Payments – One of the most unexpected things about cashflow is late payments. It was estimated by Intuit Quickbooks that late payments are “stifling the growth” of UK small businesses, with over £16.9bn owed. Late payments mean less money to reinvest in new business activities. So, make sure you chase up all late payments and put firm deadlines in place. It is something to be aware of, but the government has promised a crackdown.

Cashflow ensures that your business can keep running effectively, it’s essential but it’s also something entrepreneurs neglect to see the impact of – it really is one of the biggest challenges a company can face.

Smallest Problems

Okay, so there are probably no real ‘small’ problems – but some have more of an impact on a business than others. It can be difficult to get the balance right, and many people will think that the small problems listed here are actually rather more than that.

The reality is that the problems here, although they might seem big, are not such big issues. It’s all about priorities. Co-founder of personal finance comparison site NerdWallet Jake Gibson put it nicely for in 2014 by saying “You really have to understand the key drivers of your business and anything that doesn’t move those drivers isn’t a high priority”. So let’s examine some of the smaller problems you might face.


Taking on staff is something many startups long for, it shows you’ve got a lot of work to be done and are going in the right direction. However, if you’ve got a member of staff on board at the wrong time, you might find that they are unproductive and can drain on your budget too.

Having too many staff you don’t need is a bigger issue than having not enough in the early days of a business – you can usually plug the gaps. So, there’s no need to fret too much about this problem – but bear the following in mind:

      • There’s No Rush – Rushing into hiring someone right away is one way startups hire the the wrong kind of person. Snap decisions rarely work out, especially when it comes to staff. It just takes so much more time and effort to correct the situation down the line, so it’s a waste of resources. It’s always better to find temporary ways to fill a need and only hire the perfect person when you find them.
      • Identify Employees Gradually – You don’t need to hire someone full-time right away, you can easily have tasks and temporary work done by people in the early days. Freelancers are a great source for this, as you can utilise them when you need them. If you’ve got an ambitious, independently minded person you’ve successfully relied on for a while – then you might identify them as a potential employee, should your business be ready of course.

People naturally have images of a band of loyal staff, and this does reflect the image of many successful companies – but it’s not the be all and end all, especially in the early days. Your goal should be to take on staff when you’re ready, but it’s not the most important thing.

Office Space

Starting your own business is a precursor to having office space, it’s not necessarily something you would focus on in the beginning. You might think that there are massive limitations to not having your own space, but it’s really not quite that desperate of a situation in the short term. Focussing on office space too early can really affect growth too.

Los Angeles based commercial real estate broker John C. Kim put it well for TechCrunch in early 2015 saying “even the most brilliant of startups have blind spots in their management. One such blind spot is in the area of commercial real estate, where growing startups often risk entering into creative office space leases that could stymie their growth”. So remember the following when it comes to office space to make sure you don’t affect your growth potential:

      • Remote Working Is Possible – The possibility of working remotely is very much achievable for most businesses, especially those that have a large amount of focus on digital technologies. If you’re concerned with the need for a business address you can make use of solutions like our own virtual office packages to get a registered office for official mail, or even to handle phone calls and book meeting space as required.
      • Commercial Space Is A Big Commitment – When you get commercial space for your business, you will often have to make a very significant commitment in terms of finance – and also time. Renting an office space, whilst expensive, will often require to commit to a significant amount of time too. This level of commitment may be a barrier to growth down the line, so it’s important to only commit when you’re ready. There are also substantial business rates charged on non-domestic properties that should be considered.

Along with the staff, people will imagine an office when they dream of running their own company. But in reality, a lot of startups can do without in the early stages – particularly with the implications of remote working meaning that modern companies working online can still thrive without the additional expense of an office.

Big Brand Identity

There is a tendency to focus on your image and brand in the early days, after all – you’re trying to make a name for yourself. However, you should remember that there are some limitations to focussing on being the ‘big brand’.

You might find yourself trying to come up with the most compelling logo you possibly can, or the best name that has the most appeal. But whilst branding is important an emphasis on other areas of the business is often more crucial for startup success. When it comes to brand remember the following:

      • Brand Is A Journey – You might have heard the slightly jargon-like term ‘brand development’, and that implies that there is significant time spent on growing and developing your brand. It just ‘happens’ as part of the development of your overall business. There is no real ‘finish line’ to brand, there’s no destination – it’s a constantly evolving journey.
      • Business Makes Brand – There are plenty of successful businesses with shoddy logos and poorly chosen names, it’s part of their charm. But it also shows you that a good business can beat it’s way past branding and establish itself on business reputation alone.

Brand is a big consideration, but it’s something that will come together as your company develops and grows – it’s not necessarily something to focus on in the early days.

Startup Problems & Solutions

The main thing to remember is that whatever problems you might face as a business, there is always  a solution. These might be difficult to figure out, or they might be obvious. But at the end of the day, when you form your business with Company Formation Made Simple you will have access to support and and advice that can help make the decision process a bit easier.

Thanks for reading. Did you find this useful? If so please feel free to comment and let us know. Check out the rest of our blog for more information, particularly the ‘Tips from the team’ and ‘Business planning’ sections.

By Alex Novakovic at Made Simple – Follow Alex on Google+