5 Critical Knowledge Gaps Of First Time Entrepreneurs

Overview

After working for almost five years in IT corporate sector, my interest and attention were grabbed by fast-paced start-ups. My experience of working with a startup, coupled with dynamic interactions with a community of entrepreneurs around me provided with an opportunity to leverage the learning curve. Through this blog, I want to share my thoughts about some of the knowledge gaps which start-ups may not realize in its early stages and share my learnings from the solutions that I implemented to fill the knowledge gaps. Feel free to comment your opinions!

As Entrepreneurs, we always dream of changing the world and disrupt the way things work. However, it is a well-known fact that most of the startups don’t realize their dreams. Reasons are myriad with an interesting story behind each such failure or success. In a report published by Fortune, 42% of the startups fail due to ‘lack of market need’ according to their founders, followed by ‘running out of cash,’ ’Not the right team,’ ‘poor marketing,’ ‘outcompeted,’ ‘poor pricing’ etc.

Fundamental of any business is to have a product/service with a business model around it. Apart from product/service being offered companies start with some moving parts like marketing, strategy, Human resources, financing, budgeting, etc., lagging in any of these moving parts will create hiccups and sometimes results in accidents for a business. Most reasons cited in the fortune’s report mentioned above are directly aligned with these moving parts of the organization. These can be avoided to a major extent by bridging the related knowledge gaps from the very nascent stage of business. For e.g. running out of Cash, Poor Marketing.

In this article, I would like to discuss the five critical areas where most startups begin with lack or insufficient knowledge. It is neither possible nor necessary to get expertise in all of these areas when starting up. However, it is important for an entrepreneur to have adequate knowledge of business functions so as to avoid hitches in later stages of the enterprise.

Finance

Knowledge of Finance is one of the major factors that determine the survival and growth rate of the company. More often, entrepreneurs face obstacles that are related to lean financial management which includes managing payrolls, filing and understanding taxes. According to a study by Intuit Canada with startups, it is found that weak financial literacy may be the single biggest reason small businesses don’t succeed. Forty-four percent of small business owners have below average financial literacy skills, and only 18% could be considered above average. Financial literacy education should start as early as possible to enable entrepreneurs to make sound financial decisions.

Below are some key areas where financial literacy becomes precious:

1. Budgeting: Managing your money for operational activities. Financial controlling and examining.
2. Taxation: This is one area where I believe a professional help is required. However, understand the rules of local laws to make the most beneficial decisions.
3. Valuation: Valuation is the process of estimating the value of the business. Startups should have a decent understanding of Cash flows, Profits and projections. Valuation is imperative before reaching out to investors or some external funding.

You don’t have to be adept in finance to run a business, but you should still have a fundamental knowledge of it. The more comfortable you are with all of these numbers, the more confident you’ll be, and the better decisions you’ll make. With this fundamental understanding, it is easy to manage complex financial aspects of the organization either by hiring an expert or by consulting the companies that are providing service in this area.

In my experience hiring an independent consultant helps one to take critical financial decisions with ease.

Marketing

Young entrepreneurs are usually found to be obsessed with the business idea and stay focused more on product development instead of evaluating the global opportunity and sizing up to the market.

Knowledge of both local and world markets is critical to provide a scalable solution for consumers across markets. Knowledge of Digital Marketing is another important area where all startups should start focusing right from the start. With the fast penetration of internet to the nook and corners of the world, social media has opened up some channels where companies can reach the audience with ease.

With the rapid innovation in technology, number innovative tools that assist digital marketing are being introduced into the market. Staying on top of these tools and techniques for digital marketing is paramount for all startups to penetrate the brand to right target segments. In my experience tools such as Hootsuite, HubSpot is helpful in automating Marketing operations so that the entrepreneurs can spend their time in fine tuning their Marketing Strategy.

Process Management

In most startups, contemplating about process management begin too late. When the team starts growing, process control becomes difficult and usually leads to frustration.In the gradually complicated and fierce marketing competition, entrepreneurs cannot just run the enterprise with experience and intuition, they need to arm themselves with working process management knowledge to direct the operational activities.

Given this, process management becomes a large horizontal which spreads its necessity across verticals in an organization such as Finance, Marketing, and Technology, etc. There are various affordable tools available in the market to solve such problems to smoothen the process management in startups.

In my experience tools such as teamwork, Trello, Jira and KanbanFlow are very helpful to streamline and smoothen the processes across functions.

Law

Imagine a vehicle with a driver without the knowledge of rules of traffic. The driver would be fined for not abiding the rules if there was no accident luckily. In a society under the state of law, entrepreneurs without knowledge of the law will face the exact consequences. It is important to know how to safeguard entrepreneur’s rights with the arm of the law.

Even after having a product/service that fits consumer need, good marketing strategy, and sufficient funding, startups may face a lot of unpleasant things which may sometimes break a business if legalities are not taken care with all the parties that are involved. Laws of Taxation, IP infringement laws, Labor laws, IT laws, etc. are different areas where entrepreneurs need to put high attention before creating any contract.

In my experience, VakilSearch provides an easy access to businesses for all their legal & professional needs right from company’s incorporation to tax filing.

Stakeholder management

Startup economy comprises more stakeholders than usually expected. Governments and its agencies, investors, consumers, suppliers, small business lending institutes, competitors and the list go on. Each stakeholder will have a different impact on your business. Making such list and keeping track of the changing needs of these key stakeholders is must, right from the word go! Filling this knowledge gap helps startups to move the business in the right direction with the support and learnings from these stakeholders.

In my experience customizing the HubSpot CRM will be a good starting point.

I want to conclude this article by saying that it is key to any startup or business to find the right team equipped with adequate understanding in the areas above so as to have a smooth flow of execution. It is impossible for any one person to get expertise in all these aspects. There is no success without a right team.