Top 5 Problems You Face While Starting a Small Business in India

When country is facing economic downturn it is always a good idea to start a small business on your own.

You don’t have to look out for other jobs in private as well as government sector. Instead of being dependent on others you could start your own business.

In fact, many people in India have already started to move towards small businesses rather than running after private jobs or sarkari naukri.

However, starting a home based business might be a great option but it’s not that easy to get started.

Usually in India you’ll face many difficulties when you’re planning to start a small business on your own but here are the top 5 problems that you need to consider before launching your new business.

small business-problems

1. Getting a Loan to Start a Business

Any business small or big needs a capital to start. If you’re in India and coming from a middle class background then it is quite obvious that you’ll be unable to amass sufficient cash to start a small business.

Hence, you’ve to look towards banks or other firms that can grant you some loan to start your business. Although there’re thousands of banks which ready to lend you cash.

But the problem is they’re reluctant to give to people who don’t have strong financial background.

For example, if you want loan for Rs 500,000/- then you’ve to show your tax returns and many other documents. And it’s not necessary that you pay taxes because we’re here talking about people who come from modest background.

Hence getting a loan to start a small business in India is the biggest problem especially for people from middle class.

2. Affordable Office Space at Right Location

Even if you’re able to get a loan for starting a small business but the next challenge is finding an office space at right location and at affordable price.

As you know location is very important in the success of a business. But the cost of office space is rising so high that it has become impossible for small business owner to rent them.

Only big companies could afford the rent for their offices. You’ll really have a hard time in finding an appropriate location at right price.

There’re certain businesses that you can’t compromise on their location. Like real estate agency where location of your office matters a lot. Similarly, convenient stores and others.

Especially in urban centers it is even more difficult.

3. Targeted, Wide & Low-Priced Platforms to Reach Out Customers

Now the next challenge you might face is reaching out to customers. If you’re starting a small business then people in your area, town or city should know about it.

In order to advertise your business locally, you’ve to go through all sorts of thing.

You’ve to totally depend upon offline medium for advertising because in India still internet penetration is very low. Online advertising is quite expensive and beyond the reach of many small business owners.

Thus, in the competition to expand your business you need to innovate new advertising techniques. But in India it’s restricted to big corporations only.

Big corporations dominate all the major advertising platforms like TV, Radio, Online etc.

4. Cost of Daily Operations – Labor, Electricity, Logistics

Fourth problem that you’re going to face is the cost of daily operations. After you’ve being able to get an office space and reached out to customers you must be prepared to incur daily costs of running the business.

Labor is not so cheap because you’ve to pay them adequately. Then things like electricity are also a great issue. Especially if your business consumes a lot of it.

Next is logistics, raw material needed to run your business is also very costly.

Therefore you’ve to prepare for heavy cost to pay for daily operations of your small business.

5. High Rates of Income Tax

Now if you’re able to manage all four of above mentioned difficulties then it would be impossible to escape the tax in India.

If you know tax rates in India are very high compared to other developed countries. If your business is generating at least Rs 1,00,000/- to Rs 2,00,000/- per month then you’ve to pay 30% of your income in taxes.

It is quite a high rate compared to elsewhere in the world. Thus, high tax rates in India makes starting a small business very difficult.

The main reason for such high tax rates is that India is still a socialist country.

Is There a Way Out?

After reading above 5 problems you might be discouraged to start a small business in India. However, you don’t have to lose your heart because there’s a way out.

It is not necessary that you’ve to start a small business that is very conventional. You can think something out of box that others aren’t doing.

You shouldn’t ape others rather look around you for inspiration.

Internet Based Business

One such a small business that you can start is Internet based business. Online business is quite different than other offline small business.

It’s new in India and people are very interested in it. Internet business has many advantages over an offline business.

It really doesn’t matter, you come from upper class background or from a lower middle class. Anyone of you can start it to make money, more than a conventional small business.

Here’re some of the advantages of Internet based business.

Start Up Cost

Capital that you need to start in an Internet based business is negligible compared to starting other traditional small businesses.

You don’t require any office space or furniture, stationery because you can do it from your home.

Although its not absolutely without investment but the cost of startup here is minimal, so you don’t have to depend on any type of business loan.

There’s no issue of hiring people because just one or two people are enough. Moreover, you get wide range of customers from offline to online.

The investment to start this business is so low that even if you fail the loss would be so small. Hence there’s nothing wrong in giving a try.

Growth of Internet in India

Moreover, online business is going to expand in this country because daily more Indians are joining Internet.

As the economy grows you get an opportunity to expand your business. You don’t have to bother about advertising your business because on Internet everything spreads like a fire.

Thus internet is going to grow in India and so is your online business.

Future of Online Business in India

The best part of online business in India is it has long term future. In coming days, it is going to grow.

Although many of the people in India are not very much familiar with Internet but in future they will be as technology become accessible to everyone.


Online business may be easy to start because initial investment is very low. However, it’s not easy to run because you’ve to work hard.

So never take it lightly.

Moreover, you can’t run away from paying taxes like other small businesses.

Finally, I will conclude by saying starting a home based business in India is not that easy because you’ve to face various problems from financial to logistics.

However, there’s a way out in the form of Internet based business. It is new in India and holds a great future. Anyone irrespective of their social background can start it.

But you can’t take it lightly as it can be intellectually more difficult than traditional small businesses if not financially.


  1. says

    I think ‘Planning’ is the biggest issue. Starting a business is not an impulsive decision. It has to be a matured thought with some of the finest management skills. You have to manage time, money, marketing and a couple of other things as well. I second the points shared by this article because each and every suggestion is significant for starting a business. Thanks for sharing wisdom through word, I know they will be of great help :)


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