Building a business brick by brick or byte by byte is no mean feat. It takes talent, courage, persistence, capital and often more than a small measure of plain old-fashioned luck. It’s particularly ironic then that many of the characteristics and instincts an entrepreneur draws upon to launch a successful business can end up being his or her undoing.
Here are a few common challenges to be overcome:
Number One: Depending upon one major customer – Just about everyone has heard the old adage about having too many eggs in a single basket. If the basket drops, the eggs are history. In the case of a business, the result of relying too much on a single customer – too many metaphorical eggs in single basket – can have catastrophic results.
According to the National Federation of Independent Business, when the source of 30% or more of a small company's total revenue comes from one customer, financial dangers may emerge. When that reliance on a single customer approaches 50% or even more of total revenue, a small business is at risk of failing - almost immediately - should the customer abruptly reduce or even cancel orders, wreaking havoc on the company’s cash flow. This can happen with little or no warning.
Ironically, that customer may be the reason the business was launched in the first place. So it may seem counterintuitive, but it would be wise to limit that customer’s business to a safe percentage of total revenue, even if that means turning down additional sales opportunities with that customer. It may hurt now, but be better for the business in the long haul.
Number Two: Managing money – It’s a given that running out of cash puts businesses in peril. How to prevent that from occurring may be less so. Managing accounts and cash flow so creditors and employees can be paid in a timely manner requires the attention of business owners, even with an accountant or bookkeeper on staff.
Understanding basic bookkeeping and principles of money management are essential. What purchase payment options will you offer customers? Will it be cash, checks, debit cards, credit cards or online payment? Adhering to payment terms established for customers even if they ask for additional time, and having debt collection procedures in place in the event of nonpayment are paramount.
Number Three: Owner burnout – “Working too many hours fatigues the owner and may harm the business” is an unlikely phrase to appear in a fortune cookie, but it may well portend the future for a business whose owner burns the candle at both ends.
The stress brought on by time crunches, business complexities and irritations, tight cash flow, a lack of balance between work and home and other factors will often lead even the most energetic and disciplined business owner down the path towards burnout.
The experts suggest business owners change their routines to get off the treadmill once in a while. Replenishing body and mind can provide relief and give business owners the balance they need to keep charging ahead by simply recharging.
Heed the advice of Brian Dyson, the former COO of Coca-Cola, who said the following in a university commencement address: “Imagine life as a game in which you are juggling some five balls in the air. You name them – work, family, health, friends, and spirit – and you are keeping all of these in the air. You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four balls – family, health, friends, and spirit – are made of glass. If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged, or even shattered. They will never be the same. You must understand that and strive for balance in your life.”
Number Four: Letting go of the reins – In a nutshell, micromanaging each and every detail inhibits the growth of a business. Owners who are compelled to micromanage every aspect of their enterprise may be insecure and fearful of handing over some responsibilities to others. As a result, business growth may be stifled. Too much attention may be spent laboring on one or two key issues, while others that might over time become problematic for the business are overlooked.
Additionally, staffers will not develop into stronger performers because they are not trusted to act on their own on behalf of the business. They will be fearful of showing any initiative, instead hanging back and just going through the motions. Over the time, they may check out in their minds until they resign or let go. What eventually happens to the business is obvious.
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