For most of us, starting a company is the epitome of the American Dream. By fusing our passions, visions, and identified opportunities in the marketplace, starting a small business is the culmination of years of hard work and dedication.
However, running a small business can also be gut wrenching and downright scary at times. Cashflow, economic turmoil, employee issues, and a host of other variables – often perceived to be outside of our control – all threaten to undermine the fun and rewards of starting a company. According to the US Small Business Administration (SBA) and other sources, most small businesses fail in their first one to two years of operation.
But having your eyes wide open to these various risks is the best way to overcome them. Below are five of the scariest aspects of running and managing a small business:
- Running out of cash. The expression “cash is king” exists for a reason. Business schools often tout the importance of finding small business loans and other sources of capital to finance your startup, but lack of cash is a challenge for most small businesses –regardless of whether they are a startup or an established business. In fact, cash strains are typically even more severe after the startup phase as the business experiences high growth. While the popular Lean Startup movement rightfully emphasizes ways to minimize startup capital and risk, many entrepreneurs overlook the challenges of maintaining healthy cashflow and liquidity as their companies grow. For these reasons, it is critical that you establish solid financial controls and processes early in your venture’s lifecycle.
- Renegade employees. It may be politically correct to showcase employees as your biggest asset, but they can also be one of the biggest sources of frustration for small business owners. Most employees you hire are likely to care about your business and perform well, but they will never care or perform as well as you. And, the small subset of employees – no matter how much of a minority they are – will flat out work against you at times. This is why it is so important to establish a clear set of job descriptions and operating processes for your business before you ever hire employees.
- Complex operations. As you realize small business growth, your business will inevitably become more complex. More employees, customers, product or service types, and suppliers will all contribute to a set of operations that becomes increasingly difficult to manage along the way. The really difficult part, though, is that most entrepreneurs are visionaries more than they are operations types, which makes this challenge especially difficult to address. Just as is the case with #2 above, establishing a clear set of repeatable operating processes is critical to managing this risk.
- Legal and regulatory issues. Perhaps you’ve created a product or service that people will love, you have a great marketing engine, and/or you already have loyal customers and evangelists. Legal issues are the last thing you have to worry about, right? Not so much. I’ve learned two things the hard way: 1) anyone can sue anyone for anything they want to, regardless of how much merit a claim does or doesn’t have, and 2) the government can change the rules of the game on a moment’s notice. With these two things in mind, it is important to expect to get sued at some point in your entrepreneurial journey (because you probably will if you’re fortunate enough to be successful) and to keep a pulse on potential regulatory issues. Having a good attorney on standby can be important as your company grows, even if you don’t need them right away.
- The decision to stop growing. Growth can be painful at times, so it can be tempting to scale back growth. In his excellent book The Breakthrough Company, Keith McFarland asserts that his research of small business shows that the most successful ones are the ones that continue to grow at all times. Companies that aren’t growing are slowly failing, so it is important to find ways to make growth the norm. Without it, your business is more likely to ignore potential innovation and competitors are more likely to find ways to undermine your position. Unless you are running a lifestyle business and don’t care about creating a business that can survive in the long-term, constant growth is essential.
The good news is that although each of these five things are indeed scary at times, there are ways to mitigate these risks along the way. Register for our free small business training program to learn the fundamentals of how to manage these scary issues – and ultimately become more successful.