No one ever said starting a small business was going to be a smooth ride.But in many ways, small businesses have enjoyed a banner year in 2019. Optimism is running high.According to Capital One’s Small Business Growth Index, most business owners perceive their chances of succeeding as good or excellent. There’s no doubt that small businesses are on the rise, but that doesn’t mean that owners can relax. The same barriers to growth that existed before exist today, and any small business ignores them at its own peril.
In this article, you’ll find five of the most common obstacles that small business owners – particularly first-time owners – face, along with some guidance about how to overcome them.
Trusting Intuition Over Data
This can be a particularly dangerous problem for some business owners as it can lead to stubborn behavior and bad decisions. Inexperienced owners frequently focus on revenue above all else. The source of the revenue and how to get it doesn’t get nearly enough attention.
It’s important to keep abreast of performance indicators to know how to capitalize on the most profitable opportunities. Things like market trends, conversion rates, and sales funnel analysis are critical to understanding the broader picture for business success.
Small business owners often focus on competing in the wrong areas within their industry. Competition is an excellent growth driver, if approached correctly.If, however, a business tries to compete on its weaknesses, it can lead to disaster. Small businesses are notorious for trying to compete on price when they’re in no position to do so.
Before you commit to a competitive strategy, start by understanding your own business first. A good way to do this is to use a SWOT analysis. The SWOT examines the Strengths, Weaknesses, Opportunities, and Threats to a business.
An honest look at your own capabilities will probably reveal some areas where your business is much more competitive than others. Then, you can use these to figure out where to focus your efforts and how to work smarter, not harder.
Neglecting the Most Important Resource – People
The beating heart of any business is the people that run it. Often, small business owners don’t quite grasp how important it is to get the right people and hold on to them, until it’s too late. As unemployment shrinks, the competition for talent is increasing.If you wait until it’s time to expand before looking for qualified employees, you will have to make decisions quickly and may miss out on getting great candidates.
Hiring new employees isn’t the only way to create a workforce. Building relationships with independent contractors and freelancers is a good way to have access to reliable people who know your business. Business mentoring is another useful tool; connecting with one of the many businesses that provide mentoring is a good way to have access to experience while remaining on budget.
Taking Risk Too Lightly
Risk is a difficult concept to approach. On the one hand, growth almost always includes risk, but small business owners are often reluctant to take on risk before they perceive a stable environment. The problem with this is that there’s always a built-in level of risk that some owners stubbornly ignore. A business can always run into problems with suppliers, unexpected expenses, workplace accidents that hamstring production, and a myriad of other potential problems. The key to managing risk successfully is preparing accordingly. Analyze potential risks and vulnerabilities beforehand and have a plan to address worst-case scenarios.
Ignoring Cash Flows
The Achilles heel of small businesses often tends to be cash flow. More specifically, the failure to take likelycash flow into account when planning. Poor cash flow not only throws a wrench into the operationsof any business, but it can also stifle growth and make owners less optimistic about the future.
Fortunately, there are many tools that can help a business prepare. Creating realistic cash flow forecasts, building business credit, and developing alternative sources of financing are all crucial to preventing cash flow problems.
Often, a small business runs into short-term cash problems that might not be a serious issue in a larger organization. However, for a small business, even a short-term cash flow crunch can lead to serious issues.You need a good contingency plan to address it.
In Summary, A Little Planning Goes a Long Way
Small business owners are often cursed with too much optimism without the expertise and planning to undergird it. To ensure you are doing everything you can to succeed, focus on planning and making choices before you’re forced to.
Short-term goals are more important for a budding business than broad strategies. Be as unbiased as you can when looking at the data.Compete on your strengths, not your weaknesses. Also, never forget about what makes a business run: its people. Get the right talent on time, or at least have access to it.