Major Challenges faced

by Entrepreneurs
Major Challenges faced by
Entrepreneurs
1. Identifying successful business
opportunities
2. Sourcing Capital (finance)
3. Choosing a type of business
4. Determining a location
5. Globalization and trade liberalization
6. E-commerce
1. Identifying successful business
opportunities
 The most important stage in being a
successful entrepreneur.
 It is important to be able to identify a market

need that will allow the business to be

successful.
 The original idea for most new businesses

come from one of several sources including:

1. Identifying successful business
opportunities
 Own skills or hobbies,
 e.g. dress making or car bodyworks repair
 Very often it starts with offering these skills

to friends and relatives.

 This could be the start of a new business
1. Identifying successful business
opportunities
 Previous employment experience
 Working for a successful hairdresser allows a

potential entrepreneur to see the working of

such a business.
 Then they can judge whether they could set

up a similar business themselves.

1. Identifying successful business
opportunities
 Franchising conferences and exhibition
 These offer a wide range of new business

start-up ideas, e.g. fast food restaurants,

 An advantage is that the potential business

benefits from the support of a much larger

franchisor business.
1. Identifying successful business
opportunities
Small budget market research
 The use of the internet allows any user to

browse business directories to see how many

businesses there are in the local area offering
certain goods or services.
 This small-scale research might indicate

'gaps' in local markets that could be

profitably filled by the entrepreneur.
Sourcing Capital (finance)

 Recent International Labour Organization

(ILO) survey of new business start-ups in
Trinidad and Tobago.
 The problem of finance came top of the list of

replies from entrepreneurs regarding the

main difficulty:
Problems Stated Frequency
Lack of finance 38
Lack of customers 25
Payment from customers 18
Competition / marketing 18
Raw material / Supplies 14
Location / work place 14
Lack of transportation 13
Meeting production deadlines 6
Personal safety 5
Equipment 5
Lack of skilled workers 3
Export 3
Low profit 3
Packaging / labeling 3
2. Sourcing Capital (finance)
 Lack of sufficient own finance
 Many entrepreneurs have very limited personal savings,
especially if they are setting up their own business
because they were previously made redundant.
 Lack of awareness of the financial support and grants
available.
 Lack of any trading record to present to banks as evidence
of past business success – a trading record would tend to
give a bank confidence in lending money for a new
venture.
 Poorly produced business plan that fails to convince
potential investors of the chances of the business success.
3. Choosing a the type of business
 The type of business means both:
 The type of good or service to produce - this is dependent
on the business opportunity identified.
 The type of legal business organization.(Sole trader
partnership etc.)
 Sole trader business is more often chosen than the other
type of businesses because:
1. quick to set up,
2. few legal formalities,
3. less disclosure of accounts than with limited company,
4. complete control over decision making.
4. Determining a location

 The most important consideration is the need

to minimize fixed costs.
 When finance is limited it is very important to

try to keep the break-even level of output as

low as possible.
 This will greatly increase the chances of

survival.
 Operating from home is the most common

way for entrepreneurs to establish their

business.
4.Determining a location

 Drawbacks when operating form home:

 It may not be close to the area with the biggest

market potential.
 It lacks status - a business with its own

prestigious premises tends to generate

confidence in those who deal with it.
 It may cause family tensions.
 It may be difficult to separate private life from

working life.
 Some service industries must consider location

(hair dresser) while others( website designer)

they can locate anywhere. E.g.
5. Globalization and trade liberalization

 The impact can be positive or negative

 An opportunity for expansion
 International customers
 Easy access to supplies
 Competition from foreign firms base in your

country.
 People are shopping online
 Lack of finances to keep up with competition

in many ways. E.g. advertising, selling price,

location etc.
6. E–commerce
 E-commerce is the buying and selling of goods
or services via the internet. e.g. Amazon and
eBay
 E-commerce offers either considerable

opportunities or great threats to new business

start ups.
 For some entrepreneurs, even buying and

setting up a computer system can be a problem!

 Gwen Richtermery 2004 study list the small

business technology problems

E–commerce
E–commerce
 On the other hand, many young people are VERY
computer literate.
 They use IT as an opportunity to help manage the

finances of their small business – accounting

programs
 And to promote and advertise their business via the

internet and website.

 This Incredible facility opens huge market potential

for innovative new businesses using e-commerce to

generate customers

from around the globe.