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Major challenges Faced by

entrepreneurs
DONE BY MUTALE AND WAKA
Identifying successful business opportunities

Identifying successful business opportunities is one of the

most important stages in being an effective entrepreneur.
Failure comes as they aren’t able to identify a market that
will offer sufficient demand for their product.
New businesses

 Own skills and hobbies – E.g Loom bands, baking. These skills are normally talked about
and shared with friends and relatives. They could in turn become business opportunities.
 Previous employment experiences – E.g Working for a successful hair dresser/company.
Allows an entrepreneur to observe and learn strategies from a company/business and apply
these tactics to their own business idea.
 Franchising conferences and exhibitions – These offer a wide range of new business start-
up ideas, E.g fast-food restaurants, which also give the potential benefits of the support of
a much larger franchiser business.

 Small-budget market research – E.g Seeing reviews of different products in the market.
Browsing business activities to see in the local area to observe trends and weak spots in
the market. This can give a competitive edge and uniqueness to your product.
Sourcing capital(Finance)

 Once an idea has been established, the next step is to find a

source of finance in order to start up the business. Finance
is often the main difficulty in business start-ups
Why obtaining finance is such a major
problem for entrepreneurs
 Lack of sufficient own finance – Many entrepreneurs have very little personal savings especially
when it comes to setting up their own business, because they were previously made redundant
 Lack of awareness –There is a lack of financial support and grants available to entrepreneurs
 Lack of any trading record to present to banks as evidence of past business success – A trading
record would normally tend to give a bank assurance when deciding to give loans or not for new
ventures.
 Poorly produced business plan - This fails to convince banks to give loans as well as scare away
potential investors.
Determining a location

When deciding a location, you must greatly consider minimizing fixed costs. When
finance is limited, it is very important to try keep the break-even level of output as
low as possible. That will increase the business’ chance of survival.
Working from home is common when it comes to entrepreneurship when starting
their business.
However, the price and location chosen has a big impact on an entrepreneur’s
success. A website designer could operate from home effectively while a hairdresser
may need to find a location with the biggest number of potential customers. An
alternative is to go directly to clients’ homes, and avoid payments for rent.
Drawbacks

There is an advantage of keeping costs low but there are drawbacks:

 It may be far away from the area with the largest market potential.
 It lacks stature as a business with its own prestigious premises generates confidence.
 It may cause family tensions
 It may be difficult to separate working life from private life

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Competition

This is usually the problem for entrepreneurs unless they’re product is at a unique selling point
(USP). New businesses will often encounter competition from older, more experienced businesses
with more resources and knowledge.

The entrepreneur may have to offer better customer service to overcome the cost and pricing
advantages that bigger businesses can usually offer.

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Building a customer base

A new firm has to build a reputation in a market to increase customer numbers as quickly as
possible. The long term strength of the business will be as a result of how effectively it can keep
customers buying its products continuously.
Many small businesses try to encourage this by providing a better service than the larger and better
funded competitors. This service might include:
 Personal customer service
 Knowledgeable pre – and after – sales service
 Providing for one-off customer requests that larger firms may reluctant to provide for.