Top Challenges Facing Small Businesses
Starting a new business is a big achievement for many entrepreneurs, but maintaining one is the real challenge. There are many standard challenges that face every business whether they are large or small. These include things like hiring the right people, building a brand and so on. However, there are some that are unique to small businesses – ones most large companies have grown out of long ago. Let’s take a look at some of the biggest challenges.
1. Client Dependence
If a single client makes up more than half of your income, you are more of an independent contractor than a business owner. Diversifying the client base is vital to growing a business, but it can be difficult – especially when the client in question pays well and on time. For many small businesses, having a client willing to pay on time for a product or service is a godsend.
Unfortunately, this can result in a longer-term handicap because, even if you have employees and so on, you may be still acting as a sub-contractor for a larger business. This arrangement allows the client to avoid the risks of adding payroll in an area where the work may dry up at any time. All of that risk is transferred from the company to you and your employees. This can work out fine provided that your main clients have a consistent need for your product or service. However, it is generally better for a business to have a diversified client base to pick up the slack when any single client quits paying.
2. Money Management (Cash Flow)
Having enough cash to cover the bills is a must for any business, but it is also a must for every individual. Whether it is your business or your life, one will likely emerge as a capital drain that puts pressure on the other. While this split focus can make it difficult to grow a business, running out of cash makes growing a business impossible.
Money management becomes even more important when cash is flowing into the business and to the owner. In very select cases, handling business accounting may be within the capabilities of a business owner, professional help is always a good idea. The complexity of a business’ books go up with each client and employee, so having outside accounting can prevent it from becoming a reason not to expand.
The hours, the work and the constant pressure to perform wears on even the most passionate individuals. Many business owners, even successful ones, get stuck working much longer hours than their employees. Moreover, they fear that their business will stall in their absence, so they avoid taking any long breaks away from work to recharge. When fatigue sets in, the weariness with the hours and the results can lead to rash decisions about the business, including the desire to abandon it completely. Finding a pace that keeps the business humming without grinding down the owner is a challenge that comes early (and often) in the evolution of a small business.
4. Founder Dependence
If you get hit by a car, is your business still producing income the next day? A business that can’t operate without its founder is a business with a deadline. Many businesses suffer from founder dependence, and this dependence is often caused by the founder being unable to let go of certain decisions and responsibilities as the business grows. Meeting this challenge is easy in theory – a business owner merely has to give over more control to their employees or partners. In practice, however, this is a big stumbling block for founders because it usually involves compromising (at least initially) on the quality of work being done until the person doing the work learns the ropes.
5. Balancing Quality and Growth
Even when a business is not founder dependent, there comes a time when the issues from growth seems to match or even outweigh the benefits. Whether a service or a product, at some point a business must sacrifice in order to scale – this may mean not being able to personally manage every client relationship or not inspecting every widget.
Unfortunately, it is usually that level of personal engagement and that attention to detail that makes a business semi-successful. Therefore, many small business owners often find themselves tied to these habits to the detriment of the company’s growth. There is a large middle ground between shoddy work and an unhealthy obsession with quality, so it is up to the business owner to navigate the company’s processes towards a compromise that allows scale without hurting the brand.
The Bottom Line
These are challenges, but not death sentences. One of the worst things a would-be-business owner can do is to go into a small business without considering the challenges ahead. An important step in overcoming a challenge is knowing the size of that challenge. Besides, a competitive drive is often one of the reasons people start their own business and every challenge represents another opportunity to compete. Most importantly, be informed. We’ve helped dozens of businesses in the startup phase. Some time and money spent in this phase can save tens of thousands of dollars later. However, if you made it past startup and are experiencing any of the challenges above, give us a call. We can assess your current situation and form an action plan to help you reach the next level. We’ll most likely save you time and money in the process. Click HERE to contact us OR Click HERE to request a callback.