It is the American Dream to be a business owner! To be a business owner means that you have the opportunity to make a positive contribution to our community. And as for me, being a Philippine-born, San Francisco-raised, and now a San Diego-living citizen (and loving it), it has always been a dream of mine to own my company (it has been since I was a young girl) and to have a share of the American dream!
In 2006, I saw the opportunity and left a nine-and-a-half-year career in the financial industry to make a leap of faith to business ownership. I immediately experienced success with the start-up of the company, and while it was exciting, I also experienced some harsh realities that I did not know about until I was in the trenches running my own business.
I can understand why only two-thirds of companies survive at least two years, and about half survive at least five years (Source: Bureau of Labor Statistics, Business Employment Dynamics). After being in business for over ten years, I have realized that it takes a person with a strong will, a tough mindset, and a lot of guts to work through the most difficult of situations.
No one can ever prepare business owners for the challenges that will come. It is only through actually being in business will we ever know if we have what it takes to come out of it in one piece!
With that being said, here are the five harsh realities I have experienced while owning a business and what you can do to come out still on top!
Harsh Reality #1 - The Economy can go south at any time!
When I started my company in 2006, we experienced instant success, and our growth went from zero to making over $200,000 in annual business revenues within 16 months. Then the housing market took a big dive in 2008, and everyone took a negative hit from the financial crisis.
Half of our clients went out of business, some of our customers couldn't pay us, and we took significant losses. The financial crisis of 2008 had an adverse impact on our business, but what allowed us to keep going was that we still had customers who were in industries that felt little-to-no impact from the economic downturn.
The customers that we lost during the financial crisis were in the financial industry. At that time, this group represented 50 percent of our client base. The other 50 percent that was not impacted much by the financial crisis, because they were companies in different industries.
The lesson learned here is this: you need to diversify your customer base and the industries that are you are targeting. Just like a stock market portfolio, you have to have the right mix of investments so you can minimize losses should one stock fails. The same principle applies to running a company. Diversification of your target market is helpful in these types of unexpected situations.
Harsh Reality #2- Some of Your Customers Will Try to Rip You Off
Since my company's conception, I sought legal advice and had my attorney draft up different agreements to use with clients' engagements and projects. We didn't start any work until all legal documents were signed. In our agreements, the deliverables, expectations, and payment terms are clearly defined and outlined. All items were discussed and signed by all parties involved.
While most of our customers are amazing, and we rarely have problems with our agreements, I have experienced at least two instances where someone tried to pull a fast one and not pay up. We had one case where we delivered services and completed a project for a customer, but for whatever reason they just decided that they were not going to pay. Luckily we had legal agreements in place, and we held the customer 100 percent accountable for it!
An agreement is a legally binding document, and you can pursue collection or legal action against a non-paying customer. It is important that you work with an attorney to do the communications. More often than not, the other party will comply with the assistance of a lawyer or collection agency to collect payment for services.
I have too many business friends that have shared horror stories with me of customers not paying them for services. I have one friend that took a loss of $80,000 of services over a course of six months because he didn't document the engagement with his customer. He had forked out money from his business so he can fulfill services, but he had no legal recourse and paid for the consequences big time.
He attempted to go after his customer, but he had no proof that the work he did was authorized, and he had no legal evidence that they hired him to do work. This friend had to close his shop and went back to work for a company within a few short months after that incident. Ouch!
Harsh Reality #3 - You just gave up a 40-Hour a week job to run your 80-Hours (or more) a week business
Oh yeah! You just started your business. Congratulations! At first, it is exciting, energizing; you are driven to succeed and highly passionate to work around the clock when you first start your business! However, over time, working non-stop like a maniac will take a toll on you emotionally, mentally, and physically. It will also affect your relationship with your spouse or partner, and if you have children, it will cause stress in your parenting life, too.
The truth of the matter is this, you do need to put in your time, and a lot of it at first, to get a business off the ground. You will have to put in long hours for the first few years until you can hire enough employees that can help offload some of your primary duties in your business.
That is why it is important that you are passionate about what you do. When you love what you do, it doesn't matter how many hours you clock in. The hours will feel like minutes because you are loving what you are doing. If you have reached a point where you find yourself hating your work, it means that you are severely burnt out, and you need to get yourself off the hamster wheel to re-prioritize your time and life.
I know this all too well because I love what I do. I am also your classic workaholic! My business is important to me, and seeing it succeed is what drives me! When I first started my company, I easily worked 20 hour days--sometimes I even worked 80 or more hours on any given week. I enjoy doing my work, but the consequences of "all work all the time" was not healthy for my overall wellbeing.
I have learned that I will not be more successful, and I definitely will not make any more money pulling all-nighters for my business! When I realized this, I quickly changed how I operated. I tried getting as much sleep as possible, spending time with my family, and squeezing in time for my social life.
Running a business and having a personal/social life are tough to balance for any entrepreneur or business owner. While you may be putting in long hours on a weekly basis, setting boundaries right out the gate is going to be better for you. Take as many days off as you possibly can and do try to keep those work days short. Remember, business ownership is not a short race, but a long-term commitment, and you need to be able to run the entire marathon. Days offs and rest are vital to your long term success and happiness!
Today, I enjoy my time off from work, and I completely unplug as many times as I possibly can on a daily basis! I cherish my personal time, and I enjoy doing other things other than running my company.
Harsh Reality #4 - Your employees do not owe you anything!
Most business owners (myself included) have the idea that when we hire employees that they will be exactly like us and work doubly hard as we do! This thought is so far from reality, and most business owners will fail to scale their business because they have the wrong mindset and expectation of their workforce.
Rookie business owners also fall into the mindset that their employees are entitled to them. They think that employees are just robots and that they should do what they are supposed to do because after all, they are getting a paycheck from your company. If you have this mindset, it is time to reprogram your way of thinking, and you have to do it quickly!
The reality is that YOU are very much dependent on your employees more than they are dependent on you. They can easily find another job whereas as an employer, it is harder to find the right type of people to work for your business.
If you think your employees are entitled to you, you will soon realize that they will be unhappy working for you, and then you will find out that you are unhappy working with them, and then both of you will be miserable working together. Then one day you or your employee will decide to terminate the engagement altogether which will only add more stress to you and your business.
This is never easy for either party, and I know this as I have experienced this myself. It feels horrible when we have to part ways with an employee whether by choice or not. Letting someone go is not what we ultimately want to happen. Our goal when we hire people is to retain them, not deflect them away from our businesses.
Business growth is achievable by having good working relationships with your staff. How can you build good working relationships with your team? Well, it starts with you! You have to be an active and influential leader in your business with clearly defined company values, mission, and vision. You owe it to your team to set the tone, pace, expectations, and environment in your business.
Do you want your team to thrive? Then you have to allow for this to happen in your business. You've got to empower your team, trust your team, and let them do what you have hired them to do to the best of their abilities. However, you also need to train them. Your team will appreciate you if you teach them on how you want them to engage in your business.
If you are a controlling, raging boss who blames everything on your employees and never takes accountability for the problems in your company, well the harsh reality is, you will have a hard time keeping people, scaling, and growing your business to the next level.
Hiring and managing people are on the top list of challenges for business owners. How can you thrive with your team? It starts with you as the leader of the company. I suggest that you continue to develop yourself as a leader. Read lots of books on influential leadership and take communication and conflict resolution classes so you are equipped to handle sticky situations when issues come up with your team.
I also suggest working with a business coach, mentor, or a person/firm who specializes in HR and culture development. You owe it to your employees to be the best leader you can be to them so they will work as hard and passionately as you do in your business.
Harsh Reality #5 - Running and growing a business is just flat out one of the hardest things anyone can do!
If it were easy, everyone would be a business owner! Unfortunately, the harsh reality of all realities about business ownership is that having a business is one of the hardest ventures anyone can undertake! You do have to have tough guts, unwavering resilience, massive drive, and relentlessness to succeed in business!
While it is one of the most challenging things a person can do, business ownership also gives you the highest level of gratification knowing you have started something on your own that you love and enjoy. The real joy also comes from seeing it grow, succeed and thrive!
I can easily write ten more harsh realities about business ownership, and the truth is the challenges will never go away! You will continue to experience a different set of situations at various stages in your business. The way to make it easier for you and to help you overcome issues is to form a strong support team around you.
Arrange a business advisory team that can help you work through problems as they come up. It doesn't have to be formal. You can identify a few people (paid or unpaid, internal or external people) to help you with specific items when you need support.
You can also hire a professional firm that can assist you with the areas of your business that you find challenging. Just know that you do not have to figure things out on your own. You are not alone, and there are many resources available to you as a business owner.
Also, always ask for help. Asking for help is one of the most important things you can do for you and your business. The moment where you think you know it all and that you can do it on your own is when you will be on the fast track to business failure and closure. Don't let that be you!
Continue to learn and develop yourself as a leader for your business. Take management classes, read books that will teach you about all the areas of running a company. A recommendation I have for all small business owners for continuing education and management development is the Goldman Sachs' 10,000 Small Business Program.
I am an alumna of the Goldman Sachs' 10,000 Small Business and graduated from the Program in 2012. It is one of the best programs I have attended, and I gained so many practical skills around business management, and the program has helped me take my business to the next level.
Also, surround yourself with smarter people than you, people who are more successful than you, and connect with other business owners that you can share information and strategies with. Get into a mastermind group, or if you are not into the group thing, hire a business coach. Business ownership is hard, but you have to allow other people to help you make things easier. When you do, great magic can happen!
As a business owner and leader of your company, you have to maintain an open and flexible mindset. You have to flex with the different stages and unexpected situations that will come up in life. You have to be tough with your business dealings when it comes to the business' financial stability of your firm, and you have to be resolute but caring when it comes to your team.
You have to work hard and put in the time in your company, but also work as hard to have the discipline to prioritize time for yourself, family, and fun. As a business owner, it is a never-ending journey of learning and development, and education is key to elevating yourself to the next level.
Business ownership is challenging, but it is also fun exhilarating: it is a maze that entrepreneurs navigate and take on to conquer! All of these harsh realities are what makes it all worthwhile for the ones who are brave enough to ride the adventure we call business!
For the people who ride it out and makes it through to the top, it is the greatest feeling in the world! This is what small business ownership is about!
This blogger graduated from Goldman Sachs' 10,000 Small Businesses program. Goldman Sachs is a partner of the What Is Working: Small Businesses section.