*I wrote this as an assignment for one of my Master's Degree business classes, but thought that it might be nice to share with other small business owners and those interested in starting up a small business*
When you are a small business owner, it can feel like you are outnumbered, overworked, and grossly underpaid. But it can also give you a sense of pride, and even relief, that you work for yourself.
As the owner, designer, manufacturer, marketer, etc. for my own small business, I have experienced firsthand many of the traps and pitfalls of small business ownership. Ever the optimist, though, I have also experienced many of the milestones that keep me moving forward and hopeful for the future, and I don't like to dwell too long on what didn't work. Therefore, I will discuss some traps and pitfalls along with things that have worked for me.
I found this table online that really helps put things into perspective:
Common Reasons Why Businesses Fail:
32.1% Poor management of financial activities
14.6% Lack of management competence or experience
12.4% Inflation and economic conditions
12.3% Poor books and records
10.7% Sales marketing problems
9% Staffing problems
6.2% Union problems
2.7% Failure to use external advice.i
Therefore, only about 19% of reasons why businesses fail are outside the control of the small business owner! This can be good, as it means that if something is going wrong that is causing your business to be unsuccessful, the business owner has an 81% chance to turn things around. I think it boils down even further to three main groups: 1) Money/Bookkeeping Reasons; 2) Experience/Skills Reasons; and 3) Marketing Reasons.
One of the hardest obstacles I had to face (and still face today) was that I just plain can’t do everything all the time. “Entrepreneurs tend to concentrate on what they love, whether it's the artist who paints but doesn't spend any time marketing or the chef who lives in the kitchen and ignores her financials. Every business owner needs to be his or her own CFO. Delegating that task to a bookkeeper or an outside accounting firm means putting your life into their hands. They generally don't know the ins and outs of your business well enough to make critical decisions.ii” Let’s face it – if I’m designing new shirt ideas, I may not be focusing on advertising. If I’m create ads and spending time promoting my business, I may not be keeping up with my orders. If I’m only focusing on getting orders cranked out, I may not be coming up with new designs.
Since my budget is limited and I cannot afford to hire an employee, I’ve found the most helpful thing I can do is create a schedule (which has to be loose enough to allow for interruptions by customer calls, yet tight enough to make sure I’m touching on each important area of my business) and know when I need to spend a little extra to get things done properly. I’ll openly admit that accounting isn’t my strong area, so instead of trying to find an outside accountant (who then would be more aware of my business finances than I would) I decided it was worth the cost to invest in Quickbooks and just learn how to use the program instead. That way, I still know each bit of money that comes in and goes out, but I don’t have to know every detail about accounting.
My Quickbooks example touches on how I am responding to both the Money/Bookkeeping issue and the Experience/Skills issue.
Money also comes into the picture when I work on Marketing. Let’s face it – I don’t have the resources for things such as Super Bowl ads or magazine inserts. But by using online networking (such as Facebook, Etsy, and T-Shirt Forums), I have created some word of mouth interest and come up with several low-to-no-cost advertising and marketing options. I also know as a small business I can offer aspects of customer service that larger firms are lacking, so I make sure to emphasize the point. I strongly believe that “It’s the people who make a business successful, not the product, not the service and not the new invention.iii
I have made my fair share of mistakes in my 10 months of small business ownership, including getting scammed by a merchant and trying to “cut corners” by investing in a lower-priced piece of equipment (which I then had to replace only 3 months later, after it almost burnt my office – and my house – down). But I have also had the opportunity to work with other small business owners, share frustrations, and learn new aspects that can help my business continue to grow and succeed. In my opinion, the best thing that a small business owner can do to avoid traps and pitfalls is to be aware of them in the first place, and then educate themselves to avoid them as much as possible. Mistakes will always be made, but it’s how you respond to them and move on that can mean the difference between success and failure.