Common Problems That All Small Business Owners Face Within Their First Year of Operating

Starting a business is no small feat, and the first year can feel like a trial by fire. From financial pitfalls to marketing headaches, many small business owners find themselves wrestling with multiple challenges as they try to keep their operations afloat. Below are some of the most common hurdles that crop up in year one, broken down so you know what to expect and how to prepare.  

Financial Struggles Are Real

Money—or the lack of it—tops the list of problems. Around 16% of small businesses pinpointed cash flow as their biggest challenge in 2024. Startup costs are no joke either. While micro businesses can cost as little as $3,000 to get off the ground, larger businesses could need as much as $400,000 to even open their doors. On average, first-year operating costs land at about $40,000, forcing new entrepreneurs to stretch every dollar.  

Inflation only adds fuel to the fire. In 2024, 25% of small businesses reported it as their single greatest hurdle. Higher prices for products and rising wages put pressure on already razor-thin margins, creating cash flow problems that can make or break a business.  

The numbers only get more sobering when you consider failure rates: 20% of small businesses don’t make it past their first year. The good news? Financial discipline, keeping tabs on expenses, and exploring alternative funding options can help entrepreneurs push through these rough patches.  

Marketing: More Complex Than Expected

If you think marketing is about splashing your business name everywhere and watching the money roll in, think again. Marketing becomes a stumbling block for many small business owners, 60% of whom report that bringing in new customers is harder than they thought. Add to that the 25% who struggle to create effective strategies or send the right message, and it’s clear that marketing is not as straightforward as it seems.  

Here’s one issue: most small businesses allocate only 1% of their overall budget to marketing when experts recommend spending 7%-12% of revenue instead. That underinvestment leads to weak campaigns and missed opportunities. Standing out from competitors is another uphill battle, with 53% of businesses calling it a major challenge in 2024. To compete effectively, it’s less about spending a fortune and more about spending wisely—targeting the right audience with a clear strategy.  

The Juggling Act of Managing Time and Tasks

Small business owners often find themselves buried under an avalanche of responsibilities that aren’t as glamorous as they’d imagined. One minute you’re brainstorming creative ideas, and the next you’re knee-deep in tracking expenses or handling inventory. Then there’s the matter of handling payroll for small business, a task that seems simple until you’re bogged down with forms, deadlines, and legal requirements.  

Add hiring, training, and managing employees to the mix, and your to-do list starts looking like a CVS receipt. Balancing these demands while trying to focus on growth can feel overwhelming, making smart planning and delegation necessary.  

Managing Operations and People

Running a business means wearing a ton of different hats, and operational expenses can cut deep. Product costs alone eat up anywhere from 28% to 36% of first-year budgets, while staff costs take another 32% for those who aim to make over $100,000 in their first year. That extra investment in quality employees often pays off, but finding and retaining skilled workers is another challenge.  

Nineteen percent of small businesses reported recruitment issues in 2024, citing candidates with gaps in soft skills or technical experience. Meanwhile, existing employees require training, support, and a good reason not to jump ship. This puts additional pressure on small business owners to prioritize team management without losing focus on other areas of their business.  

Overcoming Resource Constraints

Here’s an unfortunate truth: small businesses often function with a severe lack of resources. Thirty-two percent of business owners report issues stemming from limited time, budget, or skills. Whether you’re using multiple tools to track processes or trying to manage deadlines without hiring enough staff, resources are stretched paper-thin in that first year.  

It’s one thing to recognize inefficiencies; it’s another to fix them. Over 45% of business owners admitted in 2024 that they needed to improve their processes to operate more effectively. That means streamlining administrative work, optimizing supply chains, and investing in the right technology when possible.  

Starting and managing a small business is not for the faint of heart. Like every entrepreneur who came before them, first-year business owners face a unique set of hurdles, but preparation and a focus on smart investments (in time, people, and money) can make all the difference.