Thinking about starting a new business? Running your own company is rewarding, but there are challenges. Perhaps not surprisingly, some of the biggest hurdles come when you're a first-time entrepreneur just getting your company off the ground.
New business owners need to build all of their processes from scratch while complying with myriad rules. If you've got the entrepreneurial spirit and a good idea, you can rise to the occasion -- but you need to go in with both eyes open. To prepare, consider these top challenges you're likely to encounter.
1. Complying with tax laws and other regulations
Starting up a business isn't as easy as hanging a shingle. You'll have to comply with a host of regulations, depending on the business type. When I started an Internet marketing company, I just submitted a few IRS forms -- but when my husband started his medical practice, the paperwork filled file cabinets.
At a minimum, find out what licensing requirements apply and make sure zoning allows you to operate. You'll also need to obtain a tax ID and start paying quarterly estimated income taxes -- and sales taxes, if applicable. And, if you hire workers or decide to incorporate, there's even more to do. It'd take pages to list all the rules, so schedule a brief consultation with a lawyer to understand your obligations.
2. Handling cashflow issues
Most companies don't start out with tons of cash, but you'll need money to buy materials, pay for office space, cover marketing expenditures, and pay yourself.
Figure out where this money will come from, whether it's savings, a business loan, or investors. And, have a plan for how your company will collect and spend money. If you invoice out 60 days, how will you stay afloat until money comes in?
Weigh pros and cons of each different method of financing, and have a plan in place for how you'll get to profitability. Monitor expenditures carefully and try to build up some cash in the bank to get through lean times.
3. Negotiating contracts
Almost every business needs to sign contracts. You may need to sign a lease for office space, contract with suppliers, or enter into service contracts with customers.
When negotiating contracts, read the fine print. And, if you're not 100% certain you understand every contract term, get a lawyer to look it over. You're bound by agreements you sign, so don't commit to something if you can't follow through.
4. Reaching your target market
One of the most challenging things for new business owners is to build up a client base. You may have an awesome product idea or be the best in the world at providing a particular service -- but if people don't know about your business, you aren't going to have any customers.
To reach your clientele, decide who your target audience is and consider what approach is best. If you're trying to target millennials, paying for TV ad space isn't too useful -- but a killer social media campaign could be just the ticket. Develop a detailed plan -- with a budget -- to ensure you're actually able to find people to buy what you're selling.
You can overcome challenges
While it may seem daunting to take on all these challenges, you'll soon become an old hand at handling complex financial and regulatory issues -- and you'll learn what works when it comes to marketing and contract negotiation.
As your company grows, you can also hire experts to make running a business easier and allow you to focus on doing what you love.