As the optimistic, positive-thinking entrepreneur types, we typically like to think about the upside of being small business owners. However, there are often struggles and landmines along the way – and plenty of small business failures – that often get overlooked in our culture of glorifying the seemingly “nothing but success” stories of the Mark Zuckerbergs and Bill Gates of the world.
What many don’t realize, though, is that most entrepreneurs struggle immensely at some point along the way. Even for those that are fortunate enough to become successful, the entire journey can be a long grind. Despite this fact, most popular business publications, training courses, and Small Business Administration recommendations don’t prepare entrepreneurs and small business owners for the difficult scenarios to expect.
Based on my own challenges and failures – combined with what I’ve seen countless other entrepreneurs struggle with – small business owners make a number of common mistakes along the way. I certainly have, having unintentionally run one of my companies into the ground, only to recover and grow the company to heights that I had never seen before.
Below are several things that I learned in my rise, fall, and rise again cycle as an entrepreneur:
Starting a company is easy. Growing a company is hard. Sure, getting those first one or two paying customers for your new product or service is tough, but not nearly as tough as growing and scaling a company built for long-term success. I had a relatively easy time those first two or three years, but I ran into problems once I started realizing the exponential small business growth I had strived so hard to achieve. Looking back, I didn’t take the time to get the right financial controls, employees, and legal counsel in place to get me get to the next level. Instead, my business quickly outgrew the foundation that I had (rather, didn’t have) in place and the whole thing started to crumble.
Lack of money isn’t the main reason why companies fail. Contrary to all the talk about the need for small business loans and capital in the first year or two in business, it’s actually the later, higher-growth years that cash becomes even more important. As your company scales, you need more and more working capital to keep the engine running – regardless of how much money you used to get things up and running in the first place. In addition, and just as importantly, I believe that cash strains are typically a symptom of deeper root causes, such as flawed business models, poor financial controls, and/or inefficient operations. No amount of money will fix those deeper issues.
Managing employees is much more difficult than you think. Popular business magazines and books love espousing the magic of employees, but rarely does anyone want to discuss all the headaches that go along with having employees. It is difficult to find that dream team that can help you grow your company and make decisions based on the company’s best interests, and you may very well find (like I did) that the team that you started with isn’t the same one that can help you get your business to the next level.
Never underestimate the power of policies and procedures. As “corporate” and “big company” as it may sound, clearly defined and documented roles, responsibilities, policies, and procedures are an important key to growth. One of my biggest mistakes as I grew my company the first time was to dismiss the idea of clear business processes and leveraging small business software to automate my business. After all, I was a small business that valued creativity and innovation – not standardized processes. It wasn’t until I changed my thinking in this regard that my company really took off and many of my headaches went away.
Don’t try to do it alone. We all have strengths and weaknesses, but we often don’t realize to what extreme until we use our talents to build a company. I personally would not have been able to grow my company to the level it has reached now if I hadn’t brought in business partners to help. At the end of the day, I had to decide whether I wanted to have a 100% stake in something I couldn’t manage well myself, or less of a stake in something that had a much higher likelihood of outstanding success.
Don’t get discouraged. My philosophy is that most businesses fail because the owners throw in the towel prematurely – not necessarily because the business itself has failed. Entrepreneurs and small business owners have to have strong stomachs to handle all the curveballs that come your way. For example, rejection among prospective customers, financial strains, disgruntled employees, difficult customers, competitive pressures, and dozens of other common challenges can cause the average person to quit early and often. Successful small business owners don’t get too discouraged and find ways to persevere.
I could easily write a book on this topic (and I will someday), but these are some of the challenges that are top of mind when I look back on the business successes and failures I have experienced over the years. If you can nail this handful of things in your journey, you will already have a leg up on most people that try to play the game of entrepreneurship.
In the meantime, learn more tips and best practices from experienced entrepreneurs by registering for our free online Small Business Boot Camp training course.