The challenges that entrepreneurs face may be looked at from five categories;
a ) External Factors
Some events in the economy of a country may well be beyond the control of the entrepreneur.
The cycles could adversely affect his business, to the extent of forcing him to close down. The economic cycles of recession, Boom, Depression and recovery may find the business in any stage of its own cycle. Other external factors include;
- Fluctuating interest rates
- Interruptions in supplies
- Labor market trends
- Government regulations e.g. tax laws
- Natural catastrophes
b) Personal factors
An entrepreneur goes through a lot of hurdles to get the business going. The going may be tough such that he may even be tempted to close the business. There are a number of risks associated with being an entrepreneur;
The entrepreneur may places his entire savings into the venture with the firm belief that he will earn something in return. If this does not happen, he risks losing a lot of money.
He may have chosen to give up employment to pursue his business. He may not have a fall back plan if the business collapses, hence loss of career
The entrepreneur may have to give up his social life for a while till the business stabilizes. This may adversely affect family and relations.
The collapse of the business could lead to psychological problems such as depression and/or low self esteem. The risk here is the probability of failure in the mind of the entrepreneur.
c) Lack of skills and experience
A business may start off well as a result of a favorable economic climate and availability of funds.
An entrepreneur may well have identified a very good business opportunity and capitalize on it to generate lots of revenue. However, if the entrepreneur does not have sufficient skills to see the business through this success in a consistent manner, he stands to lead the business towards incurring loses and not meeting its obligations on time. It is advisable that the entrepreneur enrolls for courses that will sharpen his skills and help him manage the business better
The entrepreneur will often employ people to assist him manage the operations of the firm. However, if these people are not trustworthy, he stands to lose a lot of money through embezzlement or pilferage of stocks. The entrepreneur himself could also be the main culprit when he draws a lot of the business resources for personal use.
e) Poor Business Ethics
The lack of proper business grooming could lead to unfair business practices by the entrepreneur.
This comes out of practice and peer pressure. The entrepreneur could find himself in conflict with the law and may get sued by his business associates. The risk here is the loss of business reputation and the possible closure of the business under directive from the relevant government authorities.