Millions of people around the world dream of becoming an entrepreneur. Be your own boss, work your own hours, and get to sit back and relax while telling others what work needs to be done.
Now if only being an entrepreneur was that easy!
Venturing out on your own path to not only run your own business but succeed at entrepreneurship, is a lot of risk even if you are only choosing to do it in your spare time. However, by implementing a business plan to handle the following dangers, you will have solutions in place to “get your ducks in a row” before jumping into the business owner pond.
No steady paycheck
All businesses must reinvest capital back into the company to allow for growth and it can take months, if not years to finally be able to pay yourself a steady wage.
Solution: It is recommended to have a minimum of 6 months of regular income saved before jumping into the business owner pond. Plan for the unexpected, as you may need to cut back to the bare necessities and live a minimalist lifestyle until your business venture becomes a success. Now you may not have to be so drastic but again…be prepared!
Relying on cash flow
Your cash flow depends solely on the income from the sales of your products and/or services. So what happens if a client doesn’t pay their invoice on time? Do you have the capital to cover the daily expenses should unforeseen circumstances arise?
Solution: Have a strong business plan in place and the capital to back it before leaping into the business owner pond. Do your research. Secure reliable clients and know the costs of not only the daily operations, but also account for breakdowns, loss of clients, legal fees, market changes, technology advancements, and so much more. You should also have a collection agency you can use in your back pocket, so they can go after what is owed to you just in case.
Market demand for your product and/or service
The marketplace can and does change very quickly. You must have a plan in place and be flexible enough to pivot your organization to match market demand. Perhaps you sell goat milk hand soap, but suddenly everyone wants non-animal based products. Do you have a backup plan?
Solution: Diversifying your products or services can be the key to ensuring market changes don’t crush your business. Your business plan should also have a pre-planned exit strategy especially for “trendy” products.
As a business owner, your time quickly becomes swallowed up as you are the key to ideas, marketing, sales, prospecting, closing, etc. You are responsible for every detail surrounding your business from legalities to the final decisions and without time, you will quickly be overwhelmed and fall victim to burnout.
Solution: Remember to take time to unwind. Perhaps a set time at the end of the day to turn off your cell phone and close your laptop to focus on yourself and your family. Delegate responsibilities to employees you trust and get organized with a schedule so you never miss a deadline or suddenly feel overwhelmed or rushed.
Unlike working for someone else, you can no longer call your boss and request a sick day and expect business to run as usual as, without you, there is no business. Burnout, stress, and illness are hurdles every entrepreneur must face and they all can have detrimental effects on your health.
Solution: Burning the candle at both ends may initially give your business a boost, however, you will quickly discover that sleeplessness, stress, and burnout have a detrimental effect on your thought process, ideas, and temperament hurting your business in the long run. It is important to always make time for you because a healthy you grow a healthy business.
As a new entrepreneur, you likely will not have the initial capital investment needed for a large team of employees making it vital to either learn it all yourself or find and hire a small group of people who match your goals and energy.
Solution: Do your research, ask tough questions, and don’t be afraid to hire on a trial basis with set deadlines for projects to ensure your employees are the right match for your business. You need people who match your business vision and when working with a small team, one wrong employee can drastically hurt deadlines and goals. Be prepared to fire if needed and trust your instincts. The right team is out there, don’t be afraid to recognize when it is not working and do what is needed to rectify it.
Becoming your own boss is an exciting opportunity! Unfortunately, many startups also fail within the first year. Markets change, clients dry up, and you could face bankruptcy, legal action, and several other unforeseen circumstances that could cause an outstanding amount of emotional and physical stress.
Solution: Be prepared for downfalls and stress by having support systems, mentors, and plans in place to help your emotional well-being during trying times.
Have you accounted for your support system? Do you have someone who can listen, emphasize, and be your cheerleader? If not, I highly recommend you build that foundation from the start.
Every business has competitors to compete with and you must be vigilant in learning the ins and outs of your competition while protecting your own business. There are several legal costs involved when it comes to your intellectual and proprietary rights as there are always going to be copycats out there who will attempt to steal your name, designs, etc. and market them as their own.
Solution: File trademarks, copyrights, and have professional legal contracts readily available for clients, staff, manufacturers, etc. to protect your interests. Your business is your baby…protect it!
IT technology systems, supply chains, record keeping, fraud, system maintenance, etc., all fall under operational risk and the more you neglect each system, the higher the risk of one or more failing. Record keeping for example must be done accurately and consistently to avoid errors on your books that could cost you thousands if not millions of dollars in fees or fines.
Solution: To mitigate operational risk, you may choose to hire a risk management team to ensure your systems and internal workings are protected from fraud, hacking, etc., and always take the time to monitor and evaluate staff and systems at regular intervals to ensure you have the right people for the right job.
Sacrifice is essential in business. Sometimes you have to give one thing up in order to have the bandwidth for something more important. Family should not be sacrificed but it often is. Trying to have a balance between being an entrepreneur and a mom as an example doesn’t really exist.
Solution: Preparing your family in advance of your goals and time away will help them understand that you may not make it to every soccer game, or family dinner. Inviting them to join in your journey can be educational for them as well so allow them to be your ambassadors!
Taking on each day as it comes and choosing to be flexible in the moment will allow you to eliminate the stress and guilt you may feel for being so distant. It’s not about balance, it’s about fulfilling your needs, by making a choice in that moment, of that day for what will fulfill your spirit.
I am always reminded of the story behind a hot dog vendor. Seems like a simple investment, but let’s break it down. 5-6K for the cart and 4k per year for the permit totaling a 10K investment upfront for a simple hot dog cart and you have yet to purchase hotdogs to sell or put aside money for unforeseen expenses such as machinery breakdowns, advertising, and more!
This is only the beginning of the total investment. You must have a full understanding of how long until you make a profit. How many hotdogs must you sell before you are able to pay yourself a wage and reinvest in your business? What about insurance or circumstances beyond your control such as weather that may limit your sales dramatically.
In short, becoming your own boss on the road to being a successful entrepreneur has many dangers, however, by implementing a strong business plan, understanding and reacting to the inherent dangers, creating a support team, and having a strong knowledge of the capital investment, time, and energy involved you will be able to respond to risks with a clear plan in place minimizing the risk of failure.
Now that you have a clear understanding of some of the risks to entrepreneurship, go out there and give it all you got because there is nothing better than being your own boss and making your dreams come true!