Starting a Small Business

small business

Starting a small business can be the answer to your dreams of quitting the nine-to-five grind and becoming your own boss. But, it’s not easy—in fact, 20% of new businesses fail within the first year, and many more struggle to survive over time. But, if you have a passion for your idea and the determination to work hard, it can be possible to turn that dream into reality.

Small businesses vary widely in size and capacity for growth, from a corner dry cleaner with two minimum-wage employees to $20 million-a-year computer software companies. But, at closer look, common points of similarity emerge in the challenges and growth patterns of these enterprises. These can be organized into a framework that increases our understanding of the nature, characteristics, and problems of small businesses.

Among these points of similarity are the challenges of managing quality initiatives. Since small firms typically have fewer human resources and less up-front capital, they often cannot afford to invest as much in quality management systems as their larger counterparts. They may also find it difficult to maintain the commitment and accessibility of upper management and internal communications that characterize larger companies.

Another common challenge is balancing cash flow. Unlike larger corporations, small businesses don’t have the financial reserves that help them weather slow times. Instead, they tend to rely on a diverse range of revenue sources to ensure steady income. This can lead to a lack of consistency and predictability, making it challenging to plan ahead.

In addition, a shortage of skilled workers is a problem that affects all small businesses. However, it can be especially challenging for those who specialize in providing services or producing goods for which there is a great demand, but where labor costs are high. These companies face an uphill battle to compete for qualified talent with larger businesses that can offer higher salaries and benefits.

Finally, resource poverty is a significant problem for small firms. The owner-manager’s salary in a small firm represents a large fraction of total revenues, leaving little left over to pay for other management and support functions, or even to reward investors. This can force a small firm to cut prices in order to build up sales, but such price cutting quickly destroys profits.

The key to success for small businesses is in finding the right balance of revenue sources and minimizing expenses. Using free or inexpensive software tools to help manage analytics, accounting, and marketing can make it easier to run your small business efficiently. It is also a good idea to get in touch with your local credit unions, which are more likely than larger banks to provide personalized service and accessible small business loans.

Finally, don’t forget to make your working space feel like a real business. If you conduct client-facing activities that require a professional office, it’s worth checking out coworking spaces that can rent desk space by the hour or day for a relatively low cost.