While the modern accessibility of the internet and various other factors have made starting a business easier than it’s ever been before, this isn’t the whole story. The sheer speed of technological and economic changes has meant that what may have been a good practice yesterday could be almost obsolete today. This presents a wide range of challenges to business owners, and being able to tackle them effectively is what separates a lot of success stories from companies that shut down as soon as they get off the ground. Whether your business has been going for years or just a few months, here are some universal challenges you have to be aware of…
The moral challenges presented by today’s global economy have been more or less unheard of in years gone by. It seems that everyone you run into is struggling towards success, striving to meet their quotas, help their chances of getting that big promotion, or simply to keep their job. With this in mind, the temptation to cut corners, leave out important information, and step on other people to get ahead, is massive. Sadly, countless employees and executives will give in to this temptation, a behaviour which can become infectious in any office. This breeds a general view that lying and cheating is just another part of business. If this goes unchecked, it will grind down the trust between employers and employees, executives and investors, and so on. Although trust isn’t all that tangible as an asset, it’s still very important, and without it, any business will inevitably fail.
Capital, Borrowing, and Management of Resources
Capital is king. This maxim has been around for decades, and it’s more true today than it has ever been before. A decent profit margin may look good on your company’s financial statements, but if expenditures and receivable collections are presenting a big enough drain your cash, there’s no way you’ll be able to stay in business for long. All too often, business owners and executives fail to put enough emphasis on cash flow. To tackle this issue, your business either needs to be adequately capitalised or sitting on some decent cash reserves that will allow them to meet all obligations as and when they’re needed. Being able to handle your cash flow well becomes even more important in times of recession, when capital is coming in more slowly, and lenders are less lenient in extending the time it takes to pay. When a business is in its early stages, handling cash flow well may be within the reach of the business owner. However, seeking out professional help is generally a smart move. The complexity in any business’s accounts will increase with every new customer, supplier and employee. If your company is going through a period of rapid growth, getting some help with keeping tabs on your cash and accounting could be the difference between excelling and filing for bankruptcy.
After your customers, your employees are the most important people to your business. With this in mind, it’s essential that you make sure your HR department is up to the challenges ahead of you. Most HR teams face issues with running their department, and enforcing policies across the company in general, particularly when the business is only just beginning to find its footing. Employee retention, effective recruitment, and ensuring levels of productivity are just a few of the common HR issues that can spring up and make life difficult for the higher-ups at a company. Many business owners, when these issues start surfacing, will call in the help of an HR consultancy such as Ellis Whittam, and have them share some of the load. Just like your cash flow, it’s important to keep a close eye on your HR, and know when you need help with it. Your workforce may be easy enough to manage for now, but if there’s any rapid growth on the horizon, you’re going to need to recruit a lot of new talent. This, in turn, will present the need for a dedicated HR department, and all the tasks that come with managing one.
Market Size and Competition
As I mentioned in the introduction, it’s never been easier turn an idea for a business into a real, profitable operation. It no longer takes weeks or months, and the filling of countless forms to start a venture. Now, if you’ve got a product or a service to sell, and you can afford to buy a domain name and pay the fee for registering a business, then you can become a business owner from one minute to the next. This is the easy part. Actually staying in business is a much more complex and challenging matter. The sheer ease with which people can start a business these days means that there’s a much larger scope of competition, and many industries and niches have been grossly oversaturated for the past few decades. You might be up against different businesses all competing for each different product you sell, some of which will focus on this product and this product alone. This growth in general selection, and more focused competition, means it can be extremely difficult for businesses of any size to gain loyal customers, and then retain them. It’s all a matter of marketing, focus, and your perception of the markets you’re trying to get into. It’s only the business owners who can master these elements, and provide a customer experience that goes above and beyond the standard, who will ultimately beat the competition. This brings me onto the next big challenge…
Customer Loyalty and Marketing
Closely linked with the oversaturation of pretty much every market is the challenge of selling yourself to your target audience effectively, and retaining the customers you already have. Social media, smartphones and similar devices, email, texting, and other technologies have all made it easier than ever for businesses and consumers to get the word out. Pinning down the marketing channels that suit the brand perfectly is essential for continued business success. Where are your customers spending most of their time? How do you reach them? What should the tone of the messaging be? Once you’ve turned an idle browser into a paying customer, what’s the most effective way for you to retain them and assure their loyalty? Knowing your customers like any member of your family, identifying what they want, and providing it to them better than anyone else will make a huge difference to the future of your business. It’s also important to be aware of today’s conservative spending climate. The recession’s far behind us, but it’s bred a generation of consumers who are still very conservative with their wallets. As a result, organic growth from both existing and new customers can be a lot harder to access for small businesses.
A Lack of Certainty
Everyone, especially people at the head of a new business, take great discomfort in any kind of uncertainty. Due to international debt and general economic struggles, uncertainty is much more widespread in the world of business today than it has been in times gone by. While it’s good to be careful, too much uncertainty can lead to business owners having a detrimental, short-term focus. New companies tend to shy away from necessary long-term planning, in order to focus their efforts on short-term goals. This may feel right given the circumstances. However, if you fail to plan strategically for five, ten, even twenty years down the line, it can quickly undermine the value in your business. New business owners need to be adept at balancing the need for immediate, knee-jerk actions with the need for informed, long-term strategies. Enough uncertainty will put business owners and executives into a strange sense of malaise, where they’ll be almost totally unable to get anything substantial done. The constant cycle of financial news may be putting you on edge, but don’t miss the forest for the trees!
Risk Management and Problem Solving
Another major challenge for all businesses is identifying, understanding, and mitigating risks, including their capital in both human and financial forms. Due to the accessibility of getting started in business, which we covered earlier, there seems to be a distinct lack of sophisticated problem-solving competency among a lot of modern business leaders. This is a major detriment to their ability to mitigate the risks facing their ventures. It’s also led to a lot of higher-ups jumping from one fire to another, depending on which one other executives are trying to put out. In a lot of cases, it’s the fast-changing business environment that sets off these issues in the first place. In order for your business to do well in the future, you need to recognise how essential good problem solving is, and develop a decent capability for it at all levels of the organisation. As you go ahead with identifying risks, you’ll have all the skills necessary to mitigate and eliminate them.
As you move ahead with your plans, make sure you’re taking these challenges into account.