Owning or running a small business comes with a special set of challenges that larger companies don’t face. Major national brands have a lot of advantages, with the biggest one being that a single misstep probably won’t derail a business.
That’s not always true for owners of small businesses, where the distance between success and failure can be precarious. Sometimes seemingly small decisions can send a smaller company on a course that can’t be corrected.
In some cases, however, it’s possible to plan ahead to avoid certain pitfalls. This won’t save you from every disaster, but it will help you steer your way around some common problems.
Assume that your business won’t always operate smoothly. Image source: Getty Images.
1. Plan for personnel problems
In a tight labor market, a small business can quickly face major trouble if key personnel leave or open positions can’t be filled. That can be addressed in multiple ways.
With your top people, have an open dialogue so you can try to at least be in the loop if someone is considering leaving. Think about how you can incentivize people to stay. That may mean financial rewards, ownership potential, or flexibility that bigger companies may not offer.
It’s important across all levels to be constantly training. Have interns ready to be hired and low-level people ready to move up, and identify who your next stars might be. Even if you only have a few people, make sure you do some cross-training so a loss doesn’t cripple you.
2. Manage your money
Just as you need an emergency fund in your personal financial life, you should have one for your business. Plan on having the occasional bad year, and expect that there will be expenses you didn’t plan for. If those things never happen, you’ll still have the money — but if they do, you won’t be ruined by bad luck or by losing a major client or customer.
Having an emergency reserve also allows you to capitalize on opportunities. Maybe a competitor wants to sell, or a new avenue of business opens up. If you have cash, you can more easily pursue those options.
3. You lack a succession plan
As the owner of a small business, it’s not fun to think about your own potential death or incapacitation. It’s important that you do, though, especially if you have a family.
Do you have someone who can run things if you’re no longer able to? Is that person separate from whoever will become the owner?
If that’s the case, then you need a contract with your successor to give him or her incentive to run your company, or at least oversee a transition or sale. You don’t want to leave your heirs a rapidly declining asset because there’s nobody capable of taking over.
It’s also important to have proper insurance, and that’s something you should get professional help obtaining. You may need separate policies to protect your family and your business; needs can vary greatly.
Expect a rainy day
It’s easy to run a small business when everything is going well. Real success is when you’re able to overcome adversity and come out the other side stronger.
No matter how well you’re doing, you should assume that things will go wrong at some point, because they almost certainly will. Live the classic saying: “Expect the best, prepare for the worst.” Even if the worst never comes, you’ll be much better off having planned for problems.
More From The Motley Fool
The Motley Fool has a disclosure policy.