Entrepreneurship is not for the weak or weary. It’s rewarding but it’s tough. It offers business owners the potential to be the highest paid person, but only if they can run a business successfully. And that typically means getting outside their comfort zone.
“Where entrepreneurs often get tripped up is when they fail to realize they are not a hair stylist but an owner of the salon,” says Betty L Collins, CPA, a director at Brady Ware & Company. “Entrepreneurs get so wrapped up in working in the business that working on the business is sometimes an afterthought.”
Smart Business spoke with Collins about the obstacles to success small business owners face and how they can learn to overcome them.
What are the issues small business owners have the most difficulty moving their business beyond?
There are several issues small businesses encounter that make it difficult to take it to the next level. For example, entrepreneurs often make mistakes when it comes to capital. They might leverage the wrong debt or have trouble securing a loan. Jumping in despite a specious funding situation can be dangerous and will make the first three to five years harder than they will already be.
Profits need to be used to pay down debt, reinvest in the business and pay the owner a salary, so entrepreneurs need to know if their product or service is profitable. That means having a deep understanding the company’s financials, something that could require a greater understanding of finances than they currently have.
Small business owners tend to make the mistake of waiting for a crisis to happen before they involve the help of outside experts, or hire family and friends to do the work that would be better suited to experienced professionals. This can spring from a general lack of trust or trusting too much the advice of family or professionals. It can also lead to unrecoverable mistakes.
How good are small businesses at self-diagnosis?
For owners, stepping back and assessing the company’s market position can be difficult when most of their time is wrapped up in the day-to-day business. Some owners have trouble facing their reality. They either fail to recognize or downplay the obstacles that are affecting their business, and that can have negative consequences.
It often takes input from others — outside professionals — to identify those obstacles. However, that comes with its own issues. For example, the owner might not have the money to pay someone for an assessment, they don’t know who to ask for help or they’re too proud to ask for help.
Just because the business owner is passionate about and capable of executing on their entrepreneurial idea doesn’t mean they’re capable of managing the bigger picture. Organizational execution means delegating and deferring, and that’s very scary for some. The bigger picture- approach takes discipline and focus. It also means setting aside time, which means reorganizing priorities.
What services should small business owners look for that would help them better identify and remove obstacles?
Small business owners would benefit from understanding that they need a banker, not just a bank. A banker can help a small business owner understand capital and how to be ‘lendable’ in all phases of the business.
Additionally, not only do business owners need an attorney and an accountant, but those professionals need to know each other. Through setup, strategy, transition and selling, those professional need to work as a team on behalf of the owner.
Unfortunately, many owners don’t know how to choose an adviser, so they may instead rely on family or friends. Or, when reaching out for professional help, they often first ask, ‘How much?’ rather than interviewing to determine the professional’s level of expertise. It takes a pursuit with an open mind to find professionals who have the right outside perspective. But doing so could save owners a lot of hassle, or save their business altogether.
Insights Accounting is brought to you by Brady Ware & Co.