Entrepreneurship comes with many challenges. Let’s look at some you are likely to encounter and how you can overcome them.
Cash flow management
Cash is king: no truer words exist in business. Many entrepreneurs and start-ups will struggle with cash flow problems. There are many possible causes of this; money tied up in stock, money tied up in debtors, insufficient working capital and other issues. The root cause comes down to the lack of financial literacy.
You cannot hope your way through business. Financial literacy is fundamental. Especially those in service businesses or with flexible pricing, you need the ability to discern whether a deal is good or bad, the ability to cost, cost-benefit analysis and profit calculations. There’s no short cut here, you need to learn.
When your business is growing and you need to grow your team there’s a huge challenge for entrepreneurs and many fail this test with devastating, sometimes fatal consequences. I will always point to Jack Welch’s words as quoted by Jim Collins in the classic Good to Great; “We need to get the wrong people off the bus, the right people on the bus and the right people in the right seats on the bus”.
Hiring decisions need to be made carefully. Understanding that your business needs more than a person to do the job but a person to become part of a great team. This doesn’t necessarily involve using expensive recruitment firms. Rather look into your organisation, your vision and culture. Get the right fit. In addition to this finding, the right people is not enough, you have to be willing to invest in them. Our country is characterized by high unemployment and the average graduate takes 6 years to find their first employment opportunity. Realizing that you’re likely not going to get the full package in the market will help you.
A business is a system of processes. Selling, procurement, production, packaging, chasing payment, making payments, reviewing performance, planning ahead, finding new ideas, talking to prospects, talking to existing customers, finding new customers, talking to suppliers, networking and many more activities. It’s quite easy to see how entrepreneurs can get caught up in it all. There’s so much to do so little time.
The solution is not the management of time but the management of self, to borrow from Dr Stephen Coveys 7 habits of highly effective people. Time cannot be manipulated, all days have the same 24 hours. What you do with the 24 hours is what makes the difference. There are many models out there depending on the nature of your business and time constraints; Quadrant two management, Eat the frog, the Pareto principle, the Pomodoro technique and many more. I use all four of these.
Your business is your baby. It’s quite common for entrepreneurs to struggle with effective delegation. Where tasks are delegated they are micro-managed to the frustration of the delegate.
Hiring good people is the best solution to this as discussed above. It’s only hard to delegate because you know you are putting the work in the hands of the wrong people. So good hiring practices are the first step. The best method of discerning a hires ability to do the job or task is work sampling but in practice, you would use all the measures. It’s also wise to invest in learning effective communication with others. This gives you the ability to communicate your vision for a task in a way they understand.
Getting your business out there is essential. Having the best doughnut in the world without the market having knowledge of it is a recipe for disaster. Marketing is, therefore, one of the most important activities your business will carry out. That said, it’s an absolute minefield. Throw in digital marketing and you have a truly complex and confusing world if you’re not personally well versed in marketing. How do you get in front of your potential customers? Who are they? Where do you find them? How do you convince them? And these are the questions you have to answer before marketing.
There are two options here as solutions to the problem; you outsource or delegate. Delegation would be the natural option if you have the skill set present in-house. But let’s be real, with our economic setup and the discussion we just had on hiring right this is unlikely to be the case. Yes, you could be fortunate and have a multi-tasker as many millennials are but luck isn’t the best business strategy. Outsourcing offers the opportunity to access requisite expertise with a much smaller investment. You can read here about how outsourcing is important for startups and entrepreneurs.
Capital requirements vary wildly in different industries. Acknowledging that capital is still a major concern for entrepreneurs. Whether it’s a capital constrained environment as they say of Zimbabwe (I don’t agree) or its access to capital and funding that is the issue many businesses fail to get adequate capital to operate effectively.
There are a few solutions I can offer here and their validity will vary with different businesses and industries. Firstly financial literacy will help you a lot; I recently spoke to an entrepreneur who bemoaned how he lacked any customers even though he invested in a truck for his painting business. Surely he should have bought a slightly less expensive truck and spent the remainder of the money on marketing. There’s lots of alternative funding out there; your customers, crowdfunding that can be added to the traditional sources.
Those who are able to raise the capital can end up as our painting entrepreneur did. Budgeting is a skill outright in itself that is absolutely necessary to business yet it is one of the biggest problem areas for entrepreneurs. In all fairness, it’s not easy getting it right because, in reality, budgeting is a complex skill that requires a certain knowledge of business and some industry experience to do effectively for your business.
First and foremost, financial literacy. Both in personal finance and business finance. You need to understand your money, where it’s going and how to treat it. Without this fundamental knowledge, you’re as good as a leaky bucket when water is added – you just leak it faster. Learning to discern between expenditures also helps. Our painting entrepreneur somehow thought pouring money into a truck would bring him customers. But he’s not alone, we see this time and time again. Investing in things that don’t support the bottom line.
Dealing with growth
Growth, especially rapid growth can bring major trouble to entrepreneurs. So tough is the world of entrepreneurship that the very thing you work extra hard for could be the thing that brings you sleepless nights and threatens your business. Fresh in Box is a great example of this, thanks to a well thought out social media based marketing plan the business grew from selling 10 boxes in its first week to being forced to limit orders to 150 per day in their second week of operation. Proactive thinking on their part to limit orders. It could’ve been a lot worse.
I’ve already spoken about team, delegation and outsourcing in this article but there’s another element to add here which is partnerships. Yes, it’s still very much under outsourcing but choosing the right partners for your business is paramount. This is something many struggle with especially in the early stages of their business. As you start you are better served by working with the people you have to work with not the people you want to work with. Those images we see of entrepreneurs being friends with the people they partner with are the result of the relationship they have built in working together and not the relationship they had before working together.
At one point or another, the entrepreneur will struggle with thoughts of self-doubt. If you’re doing it right it’s going to be more often than one point. This is because entrepreneurship is a game of continuous learning and continuous growth. New experiences are always going to involve feelings of uncertainty.
There are three solutions I can see to this problem and they are not mutually exclusive. Firstly a support system is needed and this can be built through friends and family and peer groups. Being in networking platforms with other people going through the same or related things can certainly help you understand the issues better. Secondly coaching is advisable. Just like the athlete needs a coach the entrepreneur too needs a coach. This is someone who can help you by pinpointing areas of your business that need attention and what sort of attention they need. They can help you work on your businesses fitness by addressing specific concerns. Finally, a mentor can help in the same way as a coach but their experience is the issue of value here. Mentorships don’t always involve in-depth analysis of what you’re actually doing but they can teach you lessons that will help with navigating uncharted waters for you.
Management vs leadership
This is something that many if not all entrepreneurs struggle with. It’s not just the new entrepreneurs either, this is something that even the established are prone to struggling with. Why? Well, the lines can get really blurred. Management is doing things right, making sure a process or task is carried out in the right manner. Leadership is making sure whether or not the task should be carried out in the first place. There’s not much to say here on this subject that hasn’t been said better by Dr Stephen Covey in 7 Habits of highly effective people. Also look up the essay titled “Leadership vs Management”.
Knowledge gaps – Continuous learning
Knowledge gaps hit entrepreneurs in two ways. Those younger and therefore less experienced in business and life, in general, have knowledge gaps because of lack of exposure to the operating environment. Those more experienced can also be confronted by changes and disruption brought on by technology. Imagine the knowledge gaps created by disruptive technology and how these have shaped the fates of industry giants and in fact entire industries. The case of blockbuster and Netflix is one to note. Whichever the cause there are times when entrepreneurs simply lack adequate knowledge in certain areas. Sometimes these areas prove critical to business.
The obvious solution to this is to employ an attitude of continuous learning. Entrepreneurs love books and learning. They also love to connect with people and learning doesn’t have to be secluded to classroom environments or between pages of a book. Learning can also be done from the very customers the business pursues or the market they operate it. This is how innovation works – catering to the needs of the market.