4 Challenges You May Face as an Entrepreneur

While starting your own business can be rewarding, it will likely come with many challenges you must overcome, including trying to manage your time to obtaining financing to start and grow your business. Here are 4 challenges you may face as an entrepreneur and how to overcome them.

1. Securing financing

You don’t have many options for funding a new business without savings. You can choose to borrow money, bootstrap, or seek investors. Unless you’re experienced and know what you’re doing, borrowing money to fund a business can be risky. Most loans available to entrepreneurs — especially those who aren’t experienced — will have very high interest rates. Bootstrapping is the better option if you can find a creative way to start up your business with very little money. You may also turn to crowdfunding and seeking angel investors, although you’ll need a great business plan and a really innovative idea.

2. Money management

You will probably find yourself in a difficult position at first: your personal life or the business will begin to strain the finances of the other. Your business will need adequate cash reserves to grow, which is the main reason most entrepreneurs start out with a full-time job while they build their business. Plan for lean times by saving as much as you can. Remember that you will need to pay taxes at the end of the year, so plan taxes throughout the year with solid bookkeeping and keeping track of your expenses and deductions. Get professional help with your accounting and taxes as soon as it becomes too hard to manage on your own.

3. Unforeseen expenses

Unexpected expenses and challenges to your business can come in many forms, including bills you can’t pay, unexpected resignation of key employees, bad debts from customers, dwindling working capital, and unexpected lawsuits. The best way to come out ahead is to plan for as many expenses and challenges as you can imagine.

You can reduce bad customer debt, for example, by eliminating payment terms or offering customers a discount for paying cash. Hire a professional for help with accounting and seek investors throughout the early stages of your business to avoid cash flow problems from unexpected costs.

4. Legal challenges

You’re starting a business, not a hobby. It’s important to protect yourself as soon as possible by incorporating or forming an LLC to gain personal liability protection. This protection means that, if your business is sued or has debts you can’t pay, creditors can’t go after your personal assets like your home or car. For most small businesses, a limited liability company is the best option as it’s affordable to form, has few strict maintenance requirements, and offers many of the benefits of a corporation.

Because a lawsuit, accident on the premises, or negligence of an employee can shut your business down for good and even risk your personal assets, make sure you form an LLC or incorporate your fledging business to protect yourself.

While you can’t eliminate all of the risks of starting a business — after all, that’s what being an entrepreneur is all about — you can mitigate them and increase your chances of making your business a success by anticipating and planning for challenges ahead of time.