All small business owners have problems. Some of them will only impact certain companies, industries, or geographies. Others are more common. Here are some common problems and solutions for modern entrepreneurs.
Both large and small companies may be faced with revenue concentration. It is a risk that is disclosed on large company financial filings and discussed by investors and business managers all the time. What does it mean? It means too much money comes from a small list of customers.
Why is this a problem? If 40% of your business comes from one client, you will lose 40% of your revenue if that customer leaves. That can completely devastate a small company.
Fix it by bringing in new customers and spreading out your efforts more evenly. If any one customers makes up more than 10%-15% of your revenue, you should look into diversifying a bit more.
I have written about founder dependence before on this blog, and it is worth mentioning again. I am dealing with this right now in my flash mob company, where I am trying to bring in help but will lose quality if I do so.
This is a tougher problem to overcome, but it can be done. The key here it to build a team you trust and give them incentives to perform well. Make sure the incentive really encourages the right behavior and you can easily leave your company to a great team when you are ready for that big European vacation.
Balancing Quality and Growth
As your business develops, you will often have to decide where to spend your time. You might be faced with decisions where you will have to decide whether to grow faster or maintain your focus on quality.
This decision is ultimately up to you, but I urge you to lean toward maintaining quality before anything else. Quality and a good experience is what drives repeat business, and that is the lifeblood of most business models.
Don’t scare off customers or develop a bad reputation by slacking on quality for short term gains. Focus on the long haul. Building a business is a marathon, not a sprint. Grow quickly if you can maintain the quality, but don’t give up on what brings your customers back again and again.
What are the biggest challenges you face in your business? Have you ever had to deal with any of these, or do your problems come from completely other places? Share your wisdom and experiences in the comments.