There are plenty of reasons starting a small business is worth your consideration: solving consumer needs, being your own boss, pursuing a passion. The list goes on. However, for every pro, there seems to a corresponding con which leaves room for reasonable doubt. Small business owners are hit with a multitude of challenges and obstacles to jump over—most of which they don’t see coming.
If you’re serious about starting a small business, we encourage you to do so! But keep these critical tips in mind, or risk becoming another statistic of a startup failure. We’re taking a look at the most significant problems faced by recent small business owners—according to a survey posed to 642 respondents by the National Federation of Independent Business (NFIB)—and what you can do to prevent them from occurring.
#1 Quality of Labor
22% of small business owners report poor quality of labor as the single biggest problem faced by their startup. A bad hire not only costs time and money, but may also disrupt the delicate culture you’ve worked to establish. Employ the right applicants from the get-go, and learn how to run a background check with ShareAble for Hires before putting forth any job offers. Someone who appears great on paper could turn out to be a bad seed.
Once your small business starts streaming revenue, don’t go spending it all at once. Keep in mind that you’ll owe Uncle Sam come tax season and depending on your profits (as of 2017) will be held responsible for the following bill:
- 15% for profits between $1 and $50,000
- 25% between $50,000 and $75,000
- 34% between $75,000 and $100,000
- 39% between $100,000 and $335,000
Be sure to hire an accountant or bookkeeper who can make sure you have enough money set aside and can prevent you from going into the red.
#3 Government Requirements
Tied for the second biggest problem is the red tape imposed by government regulations. Too many small businesses get held up because they’re unprepared for legalities such as:
- Employer Identification Numbers
- Licenses and Permits
- Patents and Intellectual Property
Be sure to check all these boxes prior to your launch date.
There are several types of insurance you can (and should!) acquire for your startup, but many owners are deterred by costs and lack of availability. Try to find a policy which bundles business liability, personal property, and income coverages into one cost-effective solution, such as Nationwide’s businessowner policy.
At the heart of your business’s success are your sales numbers. Simply put, without sales and a stream of revenue, it’ll be impossible to succeed. Be sure to employ a tactful strategy for generating strong sales without dipping too far into your profit margin. Your product or service should be priced appropriately—neither too cheap nor too expensive—so that your customers are happy with the price they paid for the quality received.
Small businesses will always be in competition with the behemoths who come before them. Their abundant resources and large consumer base makes squashing startups a rather simple task. However, there are spots where your small business has an advantage; take a look at the survey below conducted by Echo Research Group:
Because your company is still small, you have the opportunity to engage with your customers where larger corporations cannot. Get personal with your customer base and try to understand them better. Roll out a stellar customer service program and teach your staff how to effectively communicate your business model—the results won’t go unnoticed.
#7 Costs of Labor
The costs of labor might be more than you anticipate, and can seriously dig into your bottom line. If possible, consider outsourcing to cut expenses and save money on tasks such as:
- Information Technology
Having an incredible staff is of the utmost importance (problem #1), but hiring on too many employees can eat away at potential profits. Find the right balance and adjust as necessary.
The remaining problems reported by NFIB, such as miscellaneous issues and interest rates, are nearly impossible to predict. However, by keeping a solid grasp on these top seven problems faced by small business owners—and keeping their corresponding tips in mind—you can poise your startup for financial success and enjoy the bounty of your business for years to come.