There’s a commonly held belief out there that entrepreneurs are just people born with specific talents and able to navigate the complexities of the market without any problems. But a quick survey of some of today’s most celebrated entrepreneurs quickly proves this to be a fantasy. Steve Jobs, for instance, was blocked from working at his own company for the better part of a decade because other stakeholders didn’t like his style.
Elon Musk nearly lost it all on several occasions when lenders didn’t put up the capital he needed to get his car and rocket businesses off the ground, quite literally. Thus, even great entrepreneurs have to face down big challenges sometimes, despite their best efforts to keep their companies afloat.
Go back thirty years, and the pressures on CEOs weren’t nearly so great. The half-life of companies in the Fortune 500 was about double what it is today, and people tended to stick around for much longer. Now businesses need to time both their entry into and exit from markets with enormous precision to avoid disaster. With technological change and globalizing markets, most business models can’t survive for decade after decade, like they did in the past. They have to adapt, and adapt quickly.
So what challenges to all entrepreneurs face? Let’s take a look.
Challenge #1: Finding The Right People
One of the most significant problems that entrepreneurs face is finding the right people. They need workers who share their vision and are prepared to work hard to get there. But the problem is that very few individuals in the labor market actually do. The employee who has the same passion for a business as the person running it probably doesn’t exist – at least not yet. That kind of passion has to be nurtured and developed over the course of a person’s stay with your firm.
Entrepreneurs can build a team of people who are 100 percent dedicated to the cause, but it takes more than a great recruitment strategy and stratospheric pay. It requires meaning or purpose in the job at hand: if you can give that to people, they’ll follow you anywhere and create incredible value for your customers.
Teams like these are usually found in smaller firms with tightly knit groups that have faced down and overcome challenges together. A good approach, therefore, is to keep a small feel in your business, even if it employs hundreds of people. Breaking people up into small teams that are accountable to one another can help to generate dedication to the cause and inspire higher productivity and creativity.
Challenge #2: Cash Flow Management
Cash flow problems can affect businesses at any time in their development, not just in the first few years. Problems often arise when companies try to expand faster than their current revenue will allow to take advantage of new markets or projects. Often the viability of the company isn’t in doubt, but cash flow can turn negative and soon entrepreneurs and business leaders can find themselves struggling to pay their staff and suppliers. This is a potential disaster: staff become disgruntled and start leaving, vendors break off their relationships with your or start charging interest, and your phone lines are ringing off the hook because of late payments. Suffice to say, cash flow problems can be very expensive.
Proper resource management is, therefore, essential, whether that means planning for economic downturns in advance, slowing your rate of expansion, or agreeing loans before committing to spending. There are more details from Unsecured Capital about the process. The good news is that since the credit crunch, lenders are becoming more lenient and businesses are finding it easier to claw their way out of a cash flow black hole.
Challenge #3: More Intense Competition
Finding the right people and cash flow management has been perennial problems of business. But more intense competition is a feature of the modern, digital age. Thanks to the exponentially declining cost of starting a business, more and more people are entering the market and having a go for themselves. It’s gotten harder for companies to differentiate themselves from the competition. Standing out online as a new ecommerce store is exponentially harder than it was when Amazon first started selling books more than two decades ago.
How do great entrepreneurs overcome this problem? They don’t. Instead, they sidestep the competition issue entirely. Rather than getting into the ring with all the existing players and trying to win, they skip the fight and just do something entirely new. Instead of trying to compete their way to a high income and a successful business, they innovate. Innovation requires creativity, but it also makes it much easier to operate a profitable business – at least while everybody else tries to catch up.
Challenge #4: Gaining Customer Loyalty
The recession had a profound impact on people’s psychology. Before the crisis, consumers were loyal to companies they knew and didn’t have such an array of opportunities to shop around. Price comparison websites were only just getting started, and eBay still felt new. But now, these tools have become part of our everyday toolkit, making it more difficult for businesses to hang on to reliable customers. To make matters worse, people are a lot more conservative with their spending than they were a decade ago, trying to make each dollar go a little further than before. Thus, entrepreneurs are now heavily focused on finding ways to get their existing customers to stick around and squeezing more money out of them.
Challenge #5: The Need For Long-Term Thinking
With technology changing so rapidly, the need for long term thinking in business is more important than ever. In today’s climate, companies can’t afford to wait to be disrupted: they have to be proactive and seek out new technologies that have the potential to both hurt and help their businesses. Technology needs to become an integral part of every business leader’s planning process, regardless of whether or not they feel secure in their industry. Companies with long-term plans will ultimately succeed.