Problems Faced by Startups in Nepal

5 Difficulties of Business Startups in Nepal: Everything You Should Know


Many startup founders and business owners seem to have a lack of knowledge about compliance, tax, cash flow management, lack of execution plan, registration process, and Youths Migrating Abroad. With less emphasis on financial literacy in our country, this does not surprise me. People have been unaware of the finance law about this country. But due to startups being a new thing in Nepal and with lack of government support, people also tend to get demotivated.

1. Registering a Company

Many of them also don’t know about registering a company. Small startups also have been registered under companies act as a Private limited and not Sole proprietor. Under company act always costs you more, and you are required to pay more for registration, and also huge tax compared to when registering as a Sole proprietor.

Some startups have registered their company with capital, are way above their needs. So, a company with a huge capital also pays more tax. Because of this, small companies are also paying high taxes unnecessarily.

Setting up a startup.

To have a knowledge of setting up a business might sound hard, but it really isn’t we also have covered an article about how you can register a business in Nepal. Be specific with the capital for your startup, make a smart decision, and see the tax rate and cost for a business according to the capital. You can get your basic procedure about registering up a business here.

2. Managing Finances

Some founders even have a problem with cash flow management. Even with cash in hand, with a lack of financial knowledge, they cannot get a track of their transactions. For tracking finances, having a user-friendly software is always a plus point or else you could maintain all your transactions in the logbook. Keeping a track of finance is very important as finances mostly keep the business alive. You should know how you’re investing capital in the business and be very careful about it.

Managing finance for startup

Most of them mix their personal transactions with business transactions. You should always route the personal transaction through a different bank account and business through another. This is the problem with many one-man companies or sole proprietorship businesses. To stay updated about financial knowledge, there are many online websites and youtube channels that can give you the basic idea about it.

3. Difference between VAT and PAN

All companies do not require to get registered under VAT, and we can see some startups unnecessarily registering for VAT. For those startups, Business Pan Card is enough. For this, you should always have knowledge about the businesses that need to be registered in VAT. And also keep in mind the transaction limit for VAT registration. You can check out the process of Registration of VAT and Business PAN here.

Inland Revenue Department

4. Lack of Proper Execution Plan

Most of them have a good and workable business idea but they need funds because they are just startups with no fund. With the attachment that they have with their startup, they aren’t willing to get other investors into their startup.

Execution Plan for startup.

Making a good Business Model Canvas (BMC) and pitching in front of investors is important, which could grow the business tremendously. Investors also need to get convinced about the idea and the business to take the risk and invest. It’s usually best to get help from an expert to make a business plan. You can get mentors or incubation program to polish yourself and your startup. There are many mentors available and many organizations providing incubations program and seed-fund or linking you to investors.

5. Youths Migrating Abroad

We all have heard the famous proverb, “Youths are the pillar of the nation” We might have realized how many students start preparing for IELTS, SAT, TOEFL, etc. The majority of them also successfully end up abroad This has been a major issue for the country. Most of the Nepalese youths don’t have an exact reason why they want to visit abroad. Skilled and talented youths are leaving the country for the seek of employment and glamorous life. With the enthusiastic, energetic youths leaving the country it will be a challenge for startups and even other companies to get skilled manpower.

Youths Migrating Abroad

Creating better education, employment opportunities, and facilitate the environment to launch startups can be one of the ways to reduce it to some extent but it will still take time for that to happen at a significant rate.

These are some common problems that are hindering the growth of the startup. If you are a startup and have similar problems, we can always help. You can also share your similar problems and how you tackle them. This will help others going through a similar phase.