Challenges to Start a New Business


Starting a new business involves risk and challenges; some of the challenges may be anticipated and should build strategies as per these challenges in order to start a business. Normally business faces problems with finance, human resources, competitors, technology, changing tastes & preferences of the customers, time and uncertainty about the future, etc.


Obtaining finance to start a new business is the major challenge for an entrepreneur due to the difficult economic environment. Searching for a financial source is not an easy thing which can de-motivate the new entrants. And it is the only reason due to many new entrants step back. Depending on the market situations and demand financial institutions give preference to those who have strong background and securities.


Most of the financial institutions complicated the process of issuing loans. Here, trust is the only thing to get loans easily. Fulfilling all the requirements of the financial institutions is a tough task. So, exploring new financial sources such as friends, relatives and using personal savings can give better results.


If finding the financial source is the initial challenge then the next great challenge regarding finance is proper managing of these funds such as reducing costs, cash flow, reaching break-even point and profit margins, etc. Strategic planning and implementation are necessary for the effective management of these funds.

Human Resources

HR Challenges

Once all the financial requirements are set, then the next biggest challenge is acquiring skilled human resources. Recruiting human resources is enough to run the business. Using effective leadership skills, providing proper training & development, giving proper wages & salaries and performance appraisal, etc can motivate the employees. New entrants should make strategies according to these anticipated challenges. Employers should be ready to solve the unexpected challenges like employee grievance, employee turnover, and accidents at the workplace, etc.

Decision Making

Decision Making

Decision making is also one of the challenges to the new entrants or the entrepreneurs. A single decision can change the fate of the business. So, decision making & its success not only depends on the decision maker however also on various factors like competitor’s counter strategies, uncertainty, sudden changes in various components of the business and government policies, etc. Established companies can handle such imbalances with their experience and financial support but in the case of new entrants, these challenges may lead the business into major difficulties.

Customer Tastes & Preferences


New entrants should know the customer’s pulse to maximize the sales and profits. After internationalization, tastes and preferences of the customers change due to the product awareness and vast availability of information. The Internet is playing a major role in the growing needs of the customers. With simple access, customers can see and compare varies products. Starting a business with long life decides the success so; the entrepreneurs should consider the growing needs of the society.

New Technology


New innovations and technological developments are also one of the major challenges. Adopting new technologies may improve the quality of the product, productivity and profits. At the same time incorporating the new technology into the current business may become a major task such as, employee training, purchase of new machinery and materials, searching for financial resources and searching for skilled human resources, etc. With the new establishments all the prior investments may become useless, so the new entrants should take the decisions by keeping all these factors into consideration.



Finding right suppliers is also a great challenge for the new entrants to fulfill the production requirements. Because of the raw materials prices the total cost increases as result, it shows the effect on the profits. On the other hand, sample materials that are supplied by the suppliers for testing may not match with the routine batches. So, while selecting their supplier entrepreneur should ask multiple questions such as material specifications, labeling details, quality certificate, information about sub-component, quality agreements, and damages during the shipping, etc.

Raw Materials Cost


Acquiring raw materials is not only a challenge; however, proper maintenance is also a great challenge which enables the manufacturers to produce quality goods. Raw material cost varies according to the competitors, seasonal variations and due to the scarcity. So, bulk purchases make it possible to reduce the cost of production. However, in the case of perishable raw materials, it may not be possible to maintain bulk storage. In such conditions, manufacturing cost increases so that price should be increased.  The new entrants should consider all these complications before entering into the new business.

Government Policies

Normally business firms run according to the government policies, rules and regulations which may change the business structure completely and shows an effect on the competitiveness, pricing, and profitability. On the other hand, regulations on imported products may facilitate the local production; however, high taxes and duties particular industries show a negative effect on the new entrants and the foreign investors.

Political Environment

Government policies, rules, regulations and tax policies act as entry barriers. Policies always depend on the existing political environment where a stable political environment can help the existed and new local industries. However, the unstable political environment may show negative results on the business environment. So, the business organizations and entrepreneurs should be ready to face the national and international political outcomes.

Interest Rates


The increase in the interest rates discourages the new entrants to start and manage the new ventures. On the other hand, these increased interest rates result in the decrease in sales in customer point of view. Though there is a willingness to buy the product, however, the customers may not be able to pay with high-interest rates. High interest rates may not facilitate high investments and growth because of which the benefits of economies of scale may not be enjoyed. High interest rates will become a barrier to starting, produce and deliver better products and services because of the financial scarcity.



Competitor’s strategies demotivate and discourage the new entrants to enter into the industry. Existed firms are always strong with the benefits of economies of scale, competitive advantages such as skilled employees, financial strength, corporate strategies and brand image. Such existed firms can use the opportunities and can easily eliminate the threats with their strengths. So the new entrants should know the fact that it takes time to reach the market empire position