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6 Challenges of Sole Proprietorship

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fghfhfghfhStarting a business is a huge accomplishment for many entrepreneurs, but maintaining one, is a bigger challenge. There are many challenges common to any business – small, large, sole-proprietorship, partnership or limited liability Company. Some include finance and human resource management, market stability, customer satisfaction and branding. However, there are some that are peculiar to small or large businesses run by sole-proprietors. This is popularly referred to as “One-man business” in Nigeria. Below is a summary of the peculiar challenges I believe these type of businesses face.

Owner Dependence

Many business owners work longer hours and a lot harder than their employees. This can be because they fear that their absence may put the business in grave danger. To these owners, if you were involved in a fatal accident, what would happen to your business? Nothing? Or everything? Many businesses suffer “owner-dependence syndrome”, which is often a result of the business owner being unable to let go of certain decisions and responsibilities as the business grows. The owner sources for funds, customers and new businesses by themselves. These owners fear that the employees may not have the same level of interest in the business as they do and may not be fully committed or that the employees may compromise the quality of the business as they may not entirely understand the business as seen through the eyes of the owner. The inability to delegate decisions and responsibilities is one of the biggest problems with these types of owners.

To delegate, however, you must first hire people that you have great confidence in their abilities. This way, you can be assured that your business will be properly managed. Andrew Carnegie, a self-made steel tycoon and one of the wealthiest 19th century U.S. businessmen said “No man will make a great leader who wants to do it all himself, or to get all the credit for doing it.”

Business Processes & Procedures

Most one-man businesses begin as small-scale businesses and they expand overtime. Two or five or twenty people working together to fulfill the business needs begin to increase in hundreds of thousands. Although these changes are happening, many sole proprietors hold on to the image of that small-scale business and do not welcome them. They make everything priority and ultimately, nothing a priority. Often times, entities like this do not have relevant business processes and policies that provide them with the information about what is working and what is not working. Chaos is the enemy of any business that strives for excellence. Without establishing realistic performance benchmarks, entities are unable to measure their results. How then can they tell if they are succeeding or not? Implementing realistic metrics and timelines for measuring and tracking key performance indicators (KPI) and key success indicators will create room for exploiting opportunities and/or managing challenges/threats.

Managing the Finances

Having enough funds to run your business is essential. The financial planning of any business should begin simultaneously with the business idea. This will help to put the cash flow of the business in perspective. Many businesses set a budget and struggle to manage their finances successfully and therefore, they begin to over trade or under trade. A budget can tell you what to trade or not to trade in, but it will not prevent you from trading, good judgments will. Staying in control of finances in any organization is important. Manage the business accounting efficiently and objectively. Get professional help if possible.

Human Resources

Our society breeds favoritism when it comes to employment. Often times, it is a factor of who you know and the level of influence that person has on the organization that gets you the job. It has become increasingly difficult for organizations to hire and maintain quality employees based on merit. This can be attributed majorly to the fact that some of these roles are given out on compassionate grounds or as a reward.

To grow an excellent business, it is important to have the end in mind at the start, find talented individuals with the right expertise who care about exactly the same things as you do and also, create the enabling environment in order to preserve these talents. You may be thinking of financial limitations, considering the amount of money to be spent on salaries, but many employees look for environments that make them feel appreciated. Maslow’s hierarchy of needs is a theory in psychology proposed by Abraham Maslow in 1943.

He described the pattern in which humans generally are motivated in a pyramid of five levels; he stated that the motivation travels upwards satisfying “physiological”, “safety”, “belongingness” and “love”, “esteem”, and “self-actualization” needs. Salary is important. However, rewarding a staff with other perks of the business – promotions, bonuses, holidays, will guarantee you their total commitment. Eventually, management, listed in order of importance, involves people, product, services and profits.

Quality & Growth

Whether a business is run solely by the owner or not, there comes a time in the business when the problems and benefits of growth struggle for the spotlight. As the business expands, it becomes almost impossible to be as detailed in managing the delivery of product/service compared to when it was small-scale. Unfortunately, many successes in business can be attributed to this committed and detailed style of management. Thus, it is harder for business owners to let go of this practice because of the fear of it been disadvantageous to the company. There is need for the business to strike a balance between the threshold for quality and sustainable growth.

Attracting New Businesses

Unless as a business owner you are heavily capitalized, you may need to consider other areas to generate funds that can support the business where the need arises or begin to roll out the business in phases while you maintain a job in paid employment concurrently. If only one client provides more than half of your income, then you are better of known as a contractor or a sub-contractor rather than a business owner. When that one client decides not to make payments as agreed or no longer desires your product or services, what happens to your business? Becoming a business owner means you are offering a variety of services that meet different needs. Many businesses are built around one objective – to meet the needs of one client. It is advisable to have more than one client you do business with. This way, you can manage your business better and prevent it from folding up if one client quits. Henry Ford, who was an American industrialist and founder of the Ford Motor Company, said, “It’s not the employer who pays the wages. Employers only handle the money. It’s the customer who pays the wages”. Do not put all your eggs in one basket.

With the society gradually becoming self-reliant, the business world is evolving. More entrepreneurs are struggling for center stage; more businesses are being set up and this means stiffer competition. It is only wise not to be complacent and content with mediocrity. Constantly review your marketing strategies as the market evolves and build a reputable brand.

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