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Five Primary Challenges for Small Business Owners During Start-Up

Most small business owners begin – and in some cases continue – their companies based upon what they love to do. The entrepreneur is all about independence, doing what they love to do, and living for opportunities to conquer.

Bold statements above for sure, yet, entrepreneurs are bold people who are willing to take the calculated risks associated with running their own company. So, why do 80% of new companies fail during the first five years?

The main reason companies fail is the entrepreneur has no operating manual (unless their company is a franchise with all of that handled for a price) on what is important for the owner / CEO to focus upon during the start up stage.

Having studied what makes a company grow for over thirty years, I find this growth question to have an elusive answer. Now, I am believer in research – especially applied research – which allows people to truly understand how a topic works.

Two examples of how valuable research can be are found are in 1.) sales and 2.) growing small businesses.

The sales research was conducted by Neil Rackham back in the late 70s and 80s. He found that major account selling requires different skill sets than small sales. The small sales can use the traditional presentation based sales model and be effective. However, for major accounts – his research was a game changer. The Questioning Model of Selling was found to be the most effective and successful method to sell the larger accounts.

The second piece of research reviewed was conducted by James Fischer on small business growth. Fischer studied the growth patterns of small entrepreneurial-lead companies using the government’s classification of small business having 500 or less employees.

He found there were Seven Stages of Growth with small companies – based upon the number of employees. This research has delivered predictability for the small business owner / CEO to handle the complexity they encounter while growing their organization.

Stage One is the start-up having 10 or less employees. Since there are many small business owners who want to be sole entrepreneurs, it is possible they will not move past the first stage of growth. It is true they can have revenue growth, yet, their growth will be ultimately limited by the amount of time they can provide to grow and maintain new opportunities.

For the serial entrepreneurs and the entrepreneurs who want to build an enterprise to increase their wealth, Stage One is the starting point and named – Start Up.

The Start Up stage has five primary challenges the owner / CEO must focus upon in order to build their company successfully. Here are the five challenges for the Start Up…

1. Cash Flow

I believe every entrepreneur knows “Cash is King” and if you didn’t know it, you had better learn it well. Cash, or specifically the lack of cash, is the biggest cause of failure in small business (even large businesses have this issue). One of the most important traits of a well-run small business is how well cash is managed. From an accounting point of view, use a monthly cash flow analysis to know exactly where your cash is coming from and where it is going. It is a game of inflow versus outflow and you must measure and manage it well.

2. Destabilized by Chaos

The reason small companies function well is their flexibility which most of the larger companies want to emulate as a corporate strategy. Small companies have an abundance of chaos dealing with everyday execution of projects and objectives – not to mention surprises due to a lack of formal planning. Yet, controlled chaos is a trait admired by most leaders since it leads to a continuous stream of innovation and creativity for the small organization. Embrace the chaos, and learn to use it for your competitive advantage.

3. Slow Product Development & Getting to Market

This one is personal to me. As an entrepreneur, you have so many hats and multiple jobs that product development usually gets pushed to the back burner. Yet, new product development is your source of strong new revenue growth and attracting new customers to your company. New products enhance your offering to expand existing customer sales and finding introductions into new customers. Place new product development at the top of the priority list and dedicate time each week to its execution and marketing.

4. Limited Capital to Grow

Similar to the “Cash is King” capital is equally important to a small business. Most small businesses live on the “shoestring” style of capital – using every source they can imagine for capital infusion to insure a steady growth of revenue and the ability to service the growth. Balancing the frugal nature of the shoestring budget with the need for capital investment for growth is a key trait of the best leaders within the small company environments. Too much of either type can create bigger issues in the long term. A basic, yet, flexible budget is not a bad idea for the start up business. And, most importantly, pricing practices which generate profitable growth is your long-term key for success.

5. Improve Sales

This challenge is the most obvious and least understood. Really? You ask. Here is the main thing to remember about improving sales for a start up company. You must be selling or marketing EVERYDAY. This is the key to sustaining your revenue growth and even building an enterprise with staff doing the work the entrepreneur started. This is what leverage is all about. Leverage your sales using alignment between sales and marketing; check the leading indicators for developing a pipeline of sales opportunities; align the sales tactics and strategies depending upon who you are selling – customers or businesses. Growing revenue is the number one challenge for an entrepreneur. You cannot cut your way to sales growth or profitability. Cash is a product of increasing sales AND converting receivables into cash as fast as possible. Oh yes, the entrepreneur has to stay involved with the sales growth every day as it is not something you can delegate to others successfully in the earliest stage of growth.

Take these Five Primary Challenges for the Stage One Small Business Owner and manage them every day and week. These challenges will determine the overcome of your efforts to be a successful company.

Voss Graham, InnerActive Consulting
Posted: 11/19/2013 8:19:18 AM | with 0 comments
Filed under: accounts, boutique, business, ceo, economy, enterpreneur, fail, funding, growth, ideas, memphis, research, sales, sell, success

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Your business may be small, but that doesn't mean that your impact can't be huge! The Greater Memphis Chamber's Small Business Council serves to encourage, support, recognize and be a resource to small- and medium-sized businesses in the Memphis area. Here, our talented panel of contributors will present big ideas that could make a huge difference to your small business. And don't be afraid to ask questions ... no matter how small.

Sales & Small Business Ownership
Voss W. Graham is CEO and Senior Business Advisor for InnerActive Consulting Group Inc. He is known by his clients as "a knowledgeable partner who helps our team achieve business growth." He provides practical experience as a small business owner for over 29 years, yet is often engaged with Fortune 500 companies in the development of their people and business strategies.

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Several professionals and strategists from the local Obsidian Public Relations firm provide excellent advice on everything from research to media relations to event planning. They believe that all companies, no matter how big or small the company or its budget, should have a public relations plan driving how they manage their relationships with key stakeholders. Public relations is an integral part of doing business the right way.

Human Resources
Joel Myers is a career Human Resources professional, with over 40 years in the field including 26 years in consulting.

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Lori Turner-Wilson is CEO and Founder of RedRover Company, a sales development, marketing and PR consulting firm. Lori works with companies large and small, from start-ups to mature organizations, to help them improve the productivity of their sales force and the return on their marketing investment. Lori writes a weekly syndicated column for the Daily News, Memphis News, Nashville Ledger, and Desoto Times, among others, titled “Guerrilla Sales & Marketing,” for which she won a 2011 Summit International Award and 2012 International Communicator Award.

Design and Digital Strategy
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Labor & Employment Law
Fisher Phillips attorneys are ready to help you take a stand: in court, with employees and unions, or with competitors. Fisher Phillips has the experience and resolve to back you up. That's why some of the savviest employers come to the firm to handle their toughest labor and employment cases. The firm has 350 attorneys in 32 offices, including Memphis. For more information, visit

Since its founding in 2005, Paragon Bank has maintained a solid focus on the community and customer service. For more than 10 years, Paragon has delivered innovative products and financial expertise, convenience, and a deep understanding of what both businesses and individuals need from a ban, in order to provide solutions that make a difference. In the areas of business or personal banking, lending options or wealth management, Paragon delivers cutting edge technology, an experienced team and the most service-oriented staff of any community bank.