What People Don’t Tell You About Starting a Business

Lessons Learned, the Hard Way

It feels a little like everyone and their rescue dog is working on a tech startup these days. In a place like Austin, Texas, one can overhear ‘tech bros’ talking about their series A round and their current burn rates over a $12 beer at any hipster bar. The question of whether or not the world needs another venture capital backed tech app is up for debate, but the fact is most new businesses aren’t going to be the next Airbnb, Uber, or crypto whatever. Most new companies will be small businesses serving local communities.

While small businesses may not be unsophisticated ‘mom and pop shops’ anymore, they still have unique challenges that big corporations don’t face, or at least, don’t face in the same way. For example, in my experience co-owing a small business means both the company and the employees are more exposed to market conditions and external factors that can affect profits. They are also more susceptible to effects (both positive and negative) of workplace culture. Obviously, smaller budgets also mean making more with less instead of being able to pour money into sophisticated solutions or software.

So, if one is going to start a small business what are some of the key things to know? Well, each business is going to be little different depending on its business model, market, and product/service, but generally speaking, these are the challenges that I see most small businesses facing, especially in the beginning of their life cycle.

Workplace Culture Really is Everything 

Being deliberate about the culture one wants to create in a business is difficult. There are so many other things that feel more immediate when spinning up a new business, like turning a profit to stay afloat after making a big investment in time and money. But the saying that one bad apple spoils the bunch is more poignant in a small business because the bunch is usually more like just a handful.

Culture usually comes from the top down and owners or managers often mold it simply by their day-to-day interactions with staff and customers. If an owner has a stricter approach to management or is lax, that tends to be reflected in how employees engage with each other.

There’s no one culture that fits all small businesses so owners and managers can create the environment that works for them, but like with most other aspects of business, I believe it pays to make a plan and be deliberate about what type of workplace culture is going to being fostered. Even just spelling out what the culture should be in the company’s business plan helps provide a reference point as the business grows. I also think it’s crucial for the person(s) doing the hiring to be brought into the conversations about workplace culture and integrate it into hiring practices.

Recruiting and hiring is a learned art and the more one practices, the easier it becomes to spot good candidates that are fits both for the job and the culture. In a small business it’s tempting to overlook someone’s culture fit when they are a great fit for the position. I think the subconscious tells hiring managers that it’s easier to train someone to fit the culture than to train someone in specific job skills, but I’d argue that for most positions it’s actually the opposite. Most people are open, willing, and able to learn new workplace skills but on the other hand, most people are slow (or stubborn) to change attitudes and beliefs.

The downside of hiring the person versus the position is the time it takes to train someone. That being said, I believe investing in people is actually part of a good workplace culture which pays dividends in employee loyalty and reduced turnover.

Delegate, Delegate, Delegate

 When people start a new business there is obviously a huge amount of ownership (figurative and literal) that comes from the process. Owners might have their name in the business’ moniker and are most likely doing the work of multiple positions, but once growth starts to happen and new people can be hired to take over certain tasks it can be hard for owners to let go of total control. That is exactly the point of hiring though, to have others take over tasks so owners can focus on higher level functions and decisions.

Delegation also overlaps with workplace culture in that (good) employees want to learn and grow in their roles. When work that should fall to these employees is still being done by owners, it limits their growth and desire to be there long-term. It’s hard to trust someone else with your baby, but at the end of the day if owners aren’t delegating then they are taking time away from other tasks that could be accomplished, and they are creating less fulfilling roles for their employees.

Stay Lean

 As a business grows so does the need for everything that supports it. More equipment, more apps, more expenses. This is a no brainer but as things become busier it’s harder to find the time to review all the expenses that the small business is incurring. Owners should have set touchpoints with managers to review expenses and cut things which aren’t being used or that don’t need to be used. In big businesses a few thousand wasted dollars here and there may not be felt, but in a small business every dollar counts.

There is usually low hanging fruit that can be easily cut that may not add up to much at the time but starts to snowball over months and years. For example, many of the popular software platforms these days charge on a per user basis and things like unused subscriptions pile up. These might seem like small expenses, but when a company is bootstrapped every wasted dollar feels like it’s being plucked straight from one’s wallet.

Be Wary of Contractors and Contracts

 Using contractors when a business is just getting started is often a necessity, but there are also some pitfalls that come with the deal. Firstly, having long contracts can hamstring the business if the relationship isn’t really working out. I wouldn’t recommend signing any agreement that’s more than six months in length unless absolutely necessary and anything over one year should be a red flag.

Sometimes you can’t get around signing a contract but part of the beauty of a small business is that they are more nimble than a big one. Things also tend to change more quickly in a small business so having the freedom to pivot with those changes is crucial. Being locked into something like a three year contract with a vendor who isn’t really meeting your business needs is a bad spot to be in.

Additionally, I wouldn’t recommend prepaying for services. You might save some money by prepaying with a contractor, but if they don’t perform to expectations, you’ll have a difficult (or sometimes impossible) time getting the money back.  

The other big issue with using contractors is that one has less control over their processes. Sometimes this is the point, not having to worry about managing another process, but it can also lead to the business not getting what it needs. Scheduling, billing, and adhering to regulations tend to be out of the business’ hands with contractors. While this can save time in the short-term, it can cause big problems in the long-term.

Create Metrics and KPIs

 Most people aren’t a fan of numbers. Making decisions based on gut instinct seems to be a more popular and romantic notion than using data and metrics. That being said, there will come a time when those metrics and key performance indicators are needed and it’s so much easier to set them up from the beginning rather than retroactively. This might mean some Excel work in the beginning, but if the business can afford it, I would recommend investing in a platform that can provide easy to pull reports.

Hiring is Difficult

 Great people are hard to find. As I touched on earlier, hiring is a process that really establishes your workplace culture and is probably the biggest moving part in a new business. It’s also a skill that most people have to learn through practice.

Hiring is time intensive. Drafting job postings, sifting through hundreds of resumes, scheduling and conducting interviews; it’s a slough and can feel less mission critical in the beginning when there are a million other things to be addressed. Making time for this process is extremely important though because hiring the wrong person will end up costing much more time, money, and mental effort than focusing on it in the first place.

The best advice I can give in this area is to trust your instincts. If there is something on a person’s resume that seems off, ask some clarifying questions. If you hear some answers to questions that give you pause, move on to the next person. If someone is late and didn’t give you a good heads up, skip them. If a candidate no shows for an interview or a call, don’t give them a second chance.

The More You Know

 I’ve worked in entrepreneurship education at two world-class universities and the majority of the programming was focused on designing a new business idea. This is extremely important to sustainability, but none of the classes or workshops ever focused on these sorts of lessons learned for small business owners. I believe being aware of these topics is just as important as creating a business canvas or financial model and if owners can avoid learning about them the hard way, they’ll save themselves time, money, and a mountain of stress.