5 Biggest Challenges Facing Your Small Business

Small Business Summit 2011 Pre Event Photo 1

Starting a business is a big achievement for many entrepreneurs, but maintaining one is the larger challenge. There are many standard challenges that face every business whether they are large or small. These include things like hiring the right people, building a brand and so on. However, there are some that are unique to small businesses – ones most large companies have grown out of long ago. We’ll look at the 5 biggest challenges in this article.

Client Dependence

If a single client makes up more than half of your income, you are more of an independent contractor than a business owner. Diversifying the client base is vital to growing a business, but it can be difficult – especially when the client in question pays well and on time. For many small businesses, having a client willing to pay on time for a product or service is a godsend.

Unfortunately, this can result in a longer term handicap because, even if you have employees and so on, you may be still acting as a sub-contractor for a larger business. This arrangement allows the client to avoid the risks of adding payroll in an area where the work may dry up at any time. All of that risk is transferred from the company to you and your employees. This can work out fine provided that your main clients have a consistent need for your product or service. However, it is generally better for a business to have a diversified client base to pick up the slack when any single client quits paying.

Money Management

Having enough cash to cover the bills is a must for any business, but it is also a must for every individual. Whether it is your business or your life, one will likely emerge as a capital drain that puts pressure on the other. In order to head off this problem, small businesses owners must either be heavily capitalized or be able to pick up extra income to shore up cash reserves when needed. This is why many small businesses start out with the founders working a job and building a business simultaneously. While this split focus can make it difficult to grow a business, running out of cash makes growing a business impossible.

Money management becomes even more important when cash is flowing into the business and to the owner. Although handling business accounting and taxes may be within the capabilities of most business owners, professional help is usually a good idea. The complexity of a business’ books go up with each client and employee, so getting an assist on the book keeping can prevent it from becoming a reason not to expand.

Fatigue

The hours, the work and the constant pressure to perform wears on even the most passionate individuals. Many business owners, even successful ones, get stuck working much longer hours than their employees. Moreover, they fear that their business will stall in their absence, so they avoid taking any long breaks away from work to recharge. When fatigue sets in, the weariness with the hours and the results can lead to rash decisions about the business, including the desire to abandon it completely. Finding a pace that keeps the business humming without grinding down the owner is a challenge that comes early (and often) in the evolution of a small business.

Founder Dependence

If you get hit by a car, is your business still producing income the next day? A business that can’t operate without its founder is a business with a deadline. Many businesses suffer from founder dependence, and this dependence is often caused by the founder being unable to let go of certain decisions and responsibilities as the business grows. Meeting this challenge is easy in theory – a business owner merely has to give over more control to their employees or partners. In practice, however, this is a big stumbling block for founders because it usually involves compromising (at least initially) on the quality of work being done until the person doing the work learns the ropes.

Balancing Quality and Growth

Even when a business is not founder dependent, there comes a time when the issues from growth seems to match or even outweigh the benefits. Whether a service or a product, at some point a business must sacrifice in order to scale – this may mean not being able to personally manage every client relationship or not inspecting every widget.

Unfortunately, it is usually that level of personal engagement and that attention to detail that makes a business semi-successful. Therefore, many small business owners often find themselves tied to these habits to the detriment of the company’s growth. There is a large middle ground between shoddy work and an unhealthy obsession with quality, so it is up to the business owner to navigate the company’s processes towards a compromise that allows scale without hurting the brand.

The Bottom Line

These are challenges, but not death sentences. One of the worst things a would-be-business owner can do is to go into a small business without considering the challenges ahead. We’ve looked at some things that can help make these challenges easier, but there is no avoiding them. An important step in overcoming a challenge is knowing the size of that challenge. Besides, a competitive drive is often one of the reasons people start their own business and every challenge represents another opportunity to compete.

via 5 Biggest Challenges Facing Your Small Business.

New Companies Act and email signatures

The provisions of section 32 (4) of the new Companies Act, 2008 (new Act), which addresses the use and publication of a company’s name, provide for similar obligations to those imposed under the previous Companies Act, 1978 (previous Act), with the notable exception of the requirements for including directors’ names and nationalities in business letters and business emails.    

Both new and previous Acts require that a company’s name and registration number be mentioned in legible characters in all notices and other official publications of the company, including notices or other official publications in electronic format. The requirement extends to all bills of exchange, promissory notes, endorsements, cheques, and orders for money and goods purporting to be signed by or on behalf of the company in all letters, delivery notes, invoices, receipts, and letters of credit of the company.  

However, the new Act does not include the requirement contained in section 171(1) of the previous Act, which obliged companies to incorporate and display the full names and nationalities of each of its directors on trade catalogues, trade circulars and business letters of the company.

The provisions of the previous Act meant that companies were required to include the names of its directors (or a link to its website on which these names were listed) on all business email correspondence, which in general practice are included in a corporate email signature.

While this requirement is not provided for under the new Act, our view is that the exclusion was an oversight that could be corrected in an amendment to the new Act. We, therefore, would advise companies still to display the initials and surnames of all directors and the nationalities of any non-South African directors on all business letters, trade catalogues and trade circulars, including those in electronic format wherein a link to the company website containing this information would suffice.

By failing to comply with this requirement, should the relevant section in the new Act be amended, companies may be faced with compliance issues.

via New Companies Act and email signatures – Lexology