How do some startups find a way to get through problems that cause others to throw in the towel? They figure out how to recover after a failed product launch, speed up cash flow during tough times, withstand the threats from new competition, hire the right employees and find new customers.
We asked successful UPS customers and business experts for tips for clearing seven hurdles that small businesses typically face at some point.
Problem: Failed product line.
Solution: Learn and move on. When MyCubanStore.com looked to expand into the medical scrubs market with a Guayabera-inspired line, its color choices were too wild for many conservative hospital settings, says Alexis Martin, store president. So the store discounted the line and corrected colors for the next run.
Try adopting new product lines gradually rather than all at once, suggests Jonathan Fields, serial entrepreneur and author of two books, including Uncertainty: Turning Fear and Doubt into Fuel for Brilliance. "Do it piecemeal or do a first order on consignment," something smaller vendors are often willing to do. "One of the biggest mistakes business owners make is not asking for different terms. It's amazing the number of people who will work with you."
Problem: Shady suppliers or customers.
Solution: Take precautions. Some online retailers have seen an uptick in fraudulent orders. When something just doesn't feel right, dig deeper. Check out the IP address and search for the name.
Equally important: Vet potential suppliers. MyCubanStore.com quickly dumped an early distributor that misrepresented its inventory availability.
Problem: Too much paperwork.
Solution: Outsource and use effective technology. "The moment I have money to pay somebody to handle core administrative functions or pay someone in-house to do it, I do. It [paperwork] takes me five times longer, and it's not fun," says Fields. Many common office and industry-specific business management applications are now available by subscription.
Problem: Outmoded business model.
Solution: Listen to the market. Other Internet retailers cut into VUTT Sunglasses' sales, so owner Paul Lucca began optician training to provide a special service. Now, VUTT can offer prescription sunglasses to its worldwide clientele.
Problem: Doing what you love … but no one wants to buy.
Solution: Research. It's easy to mistake your own enthusiasm for market opportunity, as in, "If I love it, many others will too," Fields says. "Researching to make sure there are eager buyers at the right price is easier than ever."
Fields sensed an opportunity when one of his blog posts – ranting about a business problem – garnered a huge response. So he developed tribalauthor.com, which offers training for authors in smarter ways to market books. Also, try floating an idea through social media or checking out similar businesses to see what they do right and wrong. Start your research with a list of questions that will help validate your idea or highlight where changes are needed. Check out secondary research available from industry associations, web searches, periodicals, and federal and state agencies. You'll also need primary research – testing your idea specifically – such as customer interviews, surveys or focus groups, on your own or with the help of a professional.
Solution: Have something real – an actual product or service demonstration, not just a poster or presentation – to show potential investors. Journey Gym, a maker of portable gyms, won a competition for startups this way. "Make sure investors feel like the opportunity is now to get involved," suggests John Friess, Journey Gym's co-founder and CEO.
Consider alternative sources such as kickstarter.com or microventures.com, where small businesses can attract individual investors, thanks to the recently signed JOBS Act. That made it legal for companies to raise as much as $1 million a year without having to do a public offering, which is a costly, tedious process requiring state-by-state registrations.
Problem: Too many competitors, not enough differentiation.
Solution: Find a niche. It was trendy prescription sunglasses for VUTT, and Cuban-inspired apparel for MyCubanStore.com. Customers flock to businesses that offer deep product knowledge and a broad selection of the item they're seeking.
And remember, entrepreneurs don't have to go it alone. Joining a support group like Oregon's starveups.com or a business incubator program that provides services and sometimes even office space to nurture new businesses can deliver much-needed resources and advice. Also look into the new Startup America Partnership, which offers guidance and connects new businesses with local startup ecosystems.