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Challenges of Forming a Legitimate Business for Teenage Entrepreneurs

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    The economic climate is changing, and there’s a huge amount of uncertainty for anyone starting a new business. This is especially true for our teenage entrepreneurs and young business owners. Factors like global crises, economic recession, challenging job markets and increased competition mean that teenagers and young adults need to carefully consider their next steps.

    If you're graduating soon and want to start a business, you need to be aware of the challenges of starting a business during a recession and how to maximize your chances of success as a young entrepreneur.

    Common Business Challenges for Young Entrepreneurs

    It might seem strange to start by talking about difficulties, but that’s very often the route to great business success. Your first idea may not work, you might not get customers and you may not achieve what you set out to do.

    And that’s fine.

    It’s these errors and mistakes that help you adapt, learn what to do next and improve your approach. Get familiar with some of the most common challenges of starting a business during a recession as a young person.

    Inability to Secure Funding and Money

    It can be extremely difficult for teen entrepreneurs to secure funding like business loans or credit for a startup business. At your age, it's possible you don’t have a credit history yet, or one that's very lacking. Banks don’t like to take risks on new and unknown businesses, but you still have some options available.

    • Talk to your parents, friends and extended family about loaning you money or investing in your business. Make sure you get proper paperwork and agreements in place for anyone that provides you with cash.
    • Have parents or other trusted people co-sign with you on bank accounts and applications for loans or funding. You may be required to put up assets as collateral that you will repay any debt.
    • Demonstrate success in other businesses, such as freelance work, and show that you can generate enough cash flow to make loan payments. A good track record is one of the best indicators that you can take on debt.

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    Difficulties Resonating with Your Target Market

    While the younger generation is great with social media, their customer demographic might not be. Teens can certainly create a business page on social media, but the way you communicate will need to resonate with your target consumer and audience.

    • Work out who your ideal customers are, where they hang out and how you’re going to reach them. What is their average age range and do they skew more male or female? If you’re running a local business, this could be as simple as talking to your neighbors.
    • Once you know your target customers, think about the best way of getting the message across to them. For example, if you’re targeting the older generation, then traditional ads in print media or flyers might be better than online ads or social media outreach.
    • Experiment with different types of marketing to see what works. Local advertising can be surprisingly powerful for certain types of businesses and less expensive than social media and online advertising.

    Not Taking into Account the Economic Climate

    We’ll be feeling the fallout of the pandemic and recession for a while to come. This makes it more difficult to start certain kinds of businesses, especially those that may require close personal contact. You’ll need to carefully consider how social distancing and other factors impact what you offer.

    • Investigate types of products and services that you can offer remotely or without direct, face-to-face interaction with your customers.
    • Consider how essential your services might be. When it comes to economic uncertainty, people are tightening their belts and reducing their spending, so you will need to offer true value. Check out our list of small business ideas that thrive during economic downturn.
    • Consider the value of personal relationships with your customers. Even if you can’t interact directly, you can build up trust by always being available when you say you will, offering high-quality services and keeping your promises. This can go a long way in a climate of lower spending and more critical customers.

    Not Forming a Legal Business Entity

    Young business owners who don't take the steps to legally form a business will be considered a sole proprietor. However, there are risks involved with this option. In a sole proprietorship, your business earnings and personal finances are intermingled. This can create a big problem if you are ever sued by a client or customer. They will be able to go after your personal finances since there is no separation. Any of your assets would be at risk.

    We recommend starting a limited liability company, or an LLC. This business entity provides you with "limited liability," meaning your personal and business finances are separate. You personally are protected against any legal issues brought against your company.

    LLCs are quick and easy to create, and they don’t have much administrative overhead. Another big advantage of an LLC is that it helps customers, suppliers and others to take you more seriously — an important factor if your youth is working against you.

    More Tips for Starting a Teen Business 

    At Bizee, we've helped many thousands of businesses, and we know what works and what doesn’t. We have a comprehensive, downloadable guide on starting a teen business. A few quick tips include:

    • Start small: Don’t risk too much of your money, or other’s money, on your business. Bootstrap what you can and learn as you go.
    • Grow organically: Don’t expand too far, too soon. Instead, review what works about your current business and use that learning to grow in a sustainable way.
    • Ask for help: You don’t need to do everything by yourself. Ask your friends, parents and professionals for advice.

    Teen entrepreneurs should prepare for a long and rewarding road ahead. You have time on your side thanks to your age, and every experience will help you build resilience, improve and ultimately become more successful.

    If you're ready to start your business, Bizee is here to help you every step of the way. We can form your business for you for free: just $0 + your state fee. You'll get trusted advice from our business formation specialists and can rest assured that you've followed all the legal steps to start your business.

    Paul Maplesden

    Paul Maplesden

    Paul is a freelance writer, small business owner, and British expat exploring the U.S. When he’s not politely apologizing, he enjoys hats, hockey, Earl Grey Tea, mountains, and dogs.


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