Problems faced by Entrepreneurs – Internal and External Problems

Problems faced by Entrepreneurs


Entrepreneurs face a number of problems in the promotion of units and during production,marketing,distribution,procurement of raw material,and availing of incentives offered by the State government.

The problems of entrepreneurs may be divided into two groups-external and internal.External problems are those, which result from factors beyond the control of entrepreneurs while internal problems are those, which are not influenced by external factors.

The problems of industries,whether in the small sector or in organized sector are almost identical.However,given that the organized industry is financially very strong and its resources large,it can therefore,face its problems more effectively.Owing to its weak financial structure,the resources of the small sector are limited.While the large sector can employ trained and experienced managers,in the small industry,its proprietor or partners or if the unit is a company, its director or directors themselves have to take care of all the problems.The large sector can influence its raw material suppliers,its customers and at times even the government in framing its policies, but the small entrepreneur is helpless in this respect.

I. Internal Problems of Entrepreneurs

1. Planning

a) Technical feasibility

  • Inadequate technical know-how.
  • Locational disadvantage
  • Outdated production process

b) Economic viability

  • High cost of input.
  • Break-even point too high
  • Uneconomic size of project
  • Choice of idea
  • Feeble structure
  • Faulty planning
  • Poor project implementation
  • Lack of strategies
  • Lack of vision
  • Inadequate connections
  • Lack of motivation
  • Underestimation of financial requirements
  • Unduly large investment in fixed assets
  • Overestimation of demand

2. Implementation

Cost over-runs resulting from delays in getting licenses,sanctions and so on and inadequate mobilization of finance.

3. Production

a) Production management

  • Inappropriate product mix
  • Poor quality control
  • Poor capacity utilization
  • High cost of production
  • Poor inventory maintenance and replacement
  • Lack of timely and adequate modernization and so on
  • High wastage
  • Poor production

b) Labour management

  • Excising high wage structure
  • Inefficient handling of labour problems
  • Excessive manpower
  • Poor Labour productivity
  • Poor labour relations
  • Lack of trained skilled labour or technically competent personnel

c) Marketing Management

  • Dependence on a single customer or a limited number of customers/single or a limited number of products.
  • Poor sales realization
  • Defective pricing policy
  • Booking of large orders at fixed prices in an inflationary market
  • Weak market organization
  • Lack of market feed back and market research
  • Unsrupulous sale purchase practices

d) Financial management

  • Poor resource management and financial planning
  • Faulty costing
  • Dividend policy
  • General financial indiscipline and application of funds for unauthorized purposes
  • Deficiency of funds
  • Over trading
  • Unfavourable gearing or keeping adverse debt equity ratio
  • Inadequate working capital
  • Absence of cost consciousness
  • Lack of effective collection machinery

e) Administrative management

  • Over centralization
  • Lack of professionalism
  • Lack of feedback to management (management Information System)
  • Lack of timely diversification
  • Excessive expenditure on R&D

 II. External Problems of Entrepreneurs

a) Infrastructure

  • Location
  • Power
  • Water
  • Post Office and so on
  • Communication
  • Non-availability or irregular supply of critical raw materials or other inputs
  • Transport bottlenecks


  • Capital
  • Working capital
  • Long term funds
  • Recovery
  • Marketing Taxation
  • Raw material
  • Industrial and financial regulations
  • Inspections
  • Technology
  • Government policy Administrative hurdles
  • Rampant corruption
  • Lack of direction
  • Competitive and volatile environment
Problems faced by Entrepreneurs – Internal and External Problems

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