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The challenges faced by small businesses

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The challenges faced by small businesses
Abdullah Sameer AL-Mahfadi
LEBANESE INTERNATIONAL UNIVERSITY
SANA'A-YEMEN
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CONTANT
Introduction ................................................................................................................. 2
Client Dependence ....................................................................................................... 2
Money Management .................................................................................................... 2
Fatigue ........................................................................................................................ 3
Founder Dependence .................................................................................................... 3
Balancing Quality and Growth ........................................................................................ 3
Conclusion ................................................................................................................... 3
References ................................................................................................................... 4
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Introduction
Starting a business is a big achievement for many entrepreneurs, but maintaining one
is the larger challenge. There are many standard challenges every business faces
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. Here are the five
biggest challenges for small businesses.
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 your 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 larger
company to you and your employees. This arrangement can work if your main
client has 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. To avoid 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 company's books goes up with each client and employee, so
getting an assist on the bookkeeping can prevent it from becoming a reason not to
expand.
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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 their business
will stall in their absence, so they avoid taking any time away from work to recharge.
Fatigue 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 theorya 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 seem 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 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.
Conclusion
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
to help make these challenges easier, but there is no avoiding them. Besides, a
competitive drive is often one of the reasons people start their own business, and
every challenge represents another opportunity to compete.
1
1
Al-Awlaqi, Aamer, and Habtoor, “The Effect of Entrepreneurship Training on Entrepreneurial
Orientation: Evidence from a Regression Discontinuity Design on Micro-Sized Businesses.”
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References
Al-Awlaqi, Mohammed Ali, Ammar Mohamed Aamer, and Nasser Habtoor. “The
Effect of Entrepreneurship Training on Entrepreneurial Orientation: Evidence from a
Regression Discontinuity Design on Micro-Sized Businesses.” The International
Journal of Management Education, 2018. https://doi.org/10.1016/j.ijme.2018.11.003.
ResearchGate has not been able to resolve any citations for this publication.
Article
Within the literature of entrepreneurship and entrepreneurship training, several studies have discussed the nature of entrepreneurship orientation, measurement, and importance. Others studied the relationship between entrepreneurship training and entrepreneurial intention. They discussed the ability of entrepreneurship training to encourage individuals starting their own business. Little has been done to study the relationship between entrepreneurship training and entrepreneurial orientation. Utilizing a quasi-experimental approach of the sharp regression discontinuity design as the most rigorous alternative to experimental schemes, we tested the relationship using a sample of 1330 micro-sized firms. After choosing the optimal test bandwidth, the regression discontinuity design assigned 342 observations to the control group and 382 observations to the treatment group. We found positive and significant causal relationships between entrepreneurship training and all three dimensions of entrepreneurial orientation. This study contributes to filling the gap in the entrepreneurship literature in two folds. First, it is the first study that addresses the effect of entrepreneurship training on entrepreneurial orientation as a viable business strategy. Second, it studied the causal relationship between entrepreneurship training and entrepreneurial orientation in micro-sized businesses as the most in need of such an entrepreneurial experience. Finally, Theoretical and managerial implications are discussed.