It is through personal usage that people are discovering the immense value of such technological software products. With the first-hand recognition of the benefits and the scope.
They are becoming inspired, leading to their own ideas of launching a revolutionary tech startup business. Some kind of software, application or website which within today’s digital environment appears massively achievable in terms of creation and growth.
There are many appealing factors and clear advantages of taking the direction of a business tech startup in 2018. Especially when you establish the difference for example with an industry like online retail, where the sale of a product encounters limitations and difficulties.
- Tangible costs
- Stock access and management
- Warehousing and logistics logistical processes
- Delivery and exporting costs
All of this, ultimately adversely impact on the gross profit margin of a company. Additionally, the only ways to develop your profitability are to find a cheaper wholesaler or sell at a higher price. These are obvious restrictions on the potential of a business which provides a physical product, and there is a glass ceiling to an extent.
On the flip side – creating a startup business in the tech industry with a piece of software, the logistical issues are different.
Firstly, it is important to remember that this is an era of digital freedom and there is a welcoming platform for new tech and intelligent software, for automation, productivity and convenience throughout all industries – consumer and business-to-business.
The wonderful aspect of this sector is that you can make the product your own through development and creativity. There are fewer boundaries in terms of how your product can progress and grow into a different beast
As for gross profit margins, there is no physical product you must hold, maintain and deliver in the literal sense. Sending codes via email is cheaper and more practical than shipping products by lorry, ship or container, so to speak.
The boundaries of entry for international business are not relevant – as long as you are language compliant. Overall, the beauty of the tech-startup business is the potential for high growth, scope, and new development.
Business Tech Startup Challenges:
However, you may have the most amazing idea for a tech startup, but it is not a straightforward process. Here are some of the challenges which are faced and how you can overcome these in a journey to evolving and establishing a reputable business.
1. Organisation and Structure
This is the first challenge any business startup will face. Creating a team which is experienced, passionate and involved enough to develop the particular software or technology. Without this, there is not the foundation for growth longer-term.
The first and most important consideration for tech startups is having the right team implemented – ideally with an emotional buy-in and attachment to provide the best motivation, synergy, and output.
Here are the skill sets needed ideally in order to progress beyond the many hurdles ahead. You will require a balanced team with an understanding of many areas such as –
A good mix of these contributing factors is essential in order to cover the required basis of all challenges incoming and enable the business to begin building relationships with key people, from the founders through to senior employees.
2. Business Culture
Your business culture is going to play a big part in the direction of your company. Essentially it is the unified approach to everything which you do. The beliefs and personality of the company as a whole.
This is something which will resonate with every one of your current and future members of staff along with all clients and customers you endeavor.
It is an interpretation of how you do business, your vision longer-term and the principles which are choosing to stick by.
The challenging aspect can be building a positive culture which everyone is happy with. Different partners may have alternative mindsets, but compromise will need to be accepted so that the business can develop.
Tech companies can often take a laid-back approach to their company culture. This is because of the natural environment of the tech world. It is modern, alternative and relaxed.
Meanwhile, you need to ensure that you remain professional at all times and as your startup begins to grow, keep in control of this and manage it correctly with a sensible balance.
3. Managing Expectations
Managing the expectations of everybody involved in the business can be a very tough challenge.
The flexibility of people’s confidence levels, ambitions and calculations can all vary to quite an extreme extent, creating a complicated understanding of g.
It is hugely important to gather that not everyone is always going to be on the same wavelength.
Therefore, communication can’t be underestimated and is a paramount tool in expectation management. Frequent communication to attempt to handle and justify the situation.
Making sure that everyone is kept up to speed. Try not to make assumptions and clarify the context with an element of pragmatism.
Realistic and achievable goals need to be set. There is no point in forcing unrealistic goals. Yes, speed and quick development are wanted, but it must be a compromise of quality and realism.
Get it in your head that pushbacks are not implied as a failure or a disaster, just part of natural development. An openness and again more communication is the way to make this work.
When dealing with complex matters, new technologies and things which are out of your control, push backs are inevitable and it is in the makeup of tech startups.
4. In-House Development or Outsourcing
An initial decision on whether to develop your technology product in-house or via outsourced routes will need to be made. This may be quite a logical and straightforward choice if it has a natural pathway from the instigation of the startup idea from a technical viewpoint. That is if yourself or a partner has the relevant experience and learnings.
But you do not need to be a code wizard to start a tech-based business or even necessarily have one amongst your group (though it helps).
The costs may be greater to hire an in-house developer but the benefits can be substantial if you are able to make the investment.
It is a case of weighing up the circumstances for your own situation and your funding structure will be key.
You can’t help when you have that initial startup idea. And people are always going to be at different points in their lives with regards to financial stability and access.
There are numerous ways you can fund your business, depending on your unique position and relationships, the risk you are prepared to take/ how confident you are or the intensity which you want to expand.
- Bootstrapping – using personal finances
- Credit loan – borrowing money to be paid back at a later date
- Selling a stake – gaining financial support through equity release
With regards to funding of a tech startup, the initial approach must involve qualifying the product-market fit.
Without this stage in your development, you are going to be charging down a blind alley in any large-scale investments made. You will also struggle to build the required portfolio for investment. What this means is releasing and committing to smaller investments, to qualify potential traction and interests and prove that there is a sustainable audience for you to grow in the future.
It is almost like a sliding scale in terms of what you can commit, without excessive risk, but still with enough weight to have certainly tested the market waters and be sure of the response.
After this early progression stage, and once you have successfully qualified the product market fit, achieving credibility, now is a position where you will likely be limited to financial access to begin the extended growth period.
You know you have an in-demand offering but you do not have the capital to invest in the completed software development and logistics to maintain service. When you need are in need of more money and a cash injection from alternative sources, you will have to demonstrate the numbers and key metrics from your qualification of the product to the market fit.
Ultimately packaging the formula for success and presenting the scale of business growth through the quantitative and pragmatic process and formation.
There are always risks to starting a business and this applies to tech startups, especially. Many struggles to sustain long-term or even cease before developing into profitability. Here are some risks which can unsettle your rhythm and put your startup in danger.
7. Cash flow –
Cash flow can be an issue if you are struggling to generate the capital whilst having to provide certain services. Make sure your client’s payment structure is aligned and balanced with the capital you need to develop and run your business if you are not awash with cash.
8. Change in laws –
Specific laws relating to your service can have a huge impact and risk altering your service’s core functionalities.
9. Change in audience perception –
Despite your qualification of product market fit, there are always going to be unexpected twists in consumerism for tech products. It is a fast paces area and you have to be aware of this and prepared to adapt severely if necessary.
10. Personal attachment and accountability –
Maybe underestimated a risk of starting any business is the personal liability which you are invested in. You can consider insurance for protecting this in certain circumstances.
Alternatively, your relationships outside of your business can be seriously affected and you must be aware of the mental health effects as it can be an emotional road. It is crucial to have strong people around you supporting you and you must be open to them.
11. Online security –
In a digital world, running a tech product, online security is a huge risk to your business. Cyber hacking is a serious problem and you need to be well aware of the threat.
With data handling, you need to have in place all measures necessary to ensure you are not exposed to vicious activity and viruses.
Competition is always going to be a challenge to any business.
And a low barrier to entry may be advantageous for you, but everyone is in the same boat and that leaves an open window for new, similar or better ideas and also the fast-paced changing the landscape of your industry.
Strong competition can lead to saturated markets where you are vulnerable to commoditization. This is where everyone drops the price to make a competitor advantage but making redundant the margin.
But you can also thrive in a competitive market. This is where you require business-minded strategists with correct experience and knowledge to forecast, plan ahead and create contingency arrangements.
Another way in which you can overcome this is by instilling brand and culture – therefore your business is relative not only of the price. Make sure you offer greater value than simply being the cheapest.
This maintains a level of customer retention due to many qualities which are built from within your startup brand as a whole, rather than surviving as a one-trick pony.
The ways to overcome the challenge of competition are –