4 unexpected challenges when starting a small business and how to overcome them

So you’ve got a small business idea. Whether you run a retail business, a consumer-facing products business, a professional services business, or whether you sell B2B (“Business to Business”) or D2C (“Direct to Consumer”), there are many out there. New small business owners face some of the same obstacles along the way.

Let’s take a look at some of the biggest challenges in starting a small business and how to overcome them.

1. Forming an LLC or other corporation

If you want to make your business “official” under the law, you must form a limited liability company (LLC), S Corporation, or other legal business entity.

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Setting up a legal business can help you establish a separate corporate identity that is separate from your personal identity and personal finances. This will help you obtain your employer identification number (a tax identification number, like your company’s Social Security number). And it can help you save time (and money) come tax time by making it easier to track your business expenses.

LLCs and other business entities are formed at the state level. You must file official documents with your state, which may be called “Articles of Incorporation” or “Articles of Incorporation,” depending on your state. To form an LLC (or other legal business entity), you can do so directly by contacting your state’s Secretary of State’s office or other business regulatory filing agency.

You do not need to hire a lawyer or accountant to form an LLC. Some people want to pay for professional help to make sure the details are done correctly, but it is not required. There are also LLC formation services that can assist you for a fee. CorpNet, Bizee, and LegalZoom are a few examples of online business formation services.

Disclosure: I’ve done freelance writing projects at Bizee (formerly Incfile) and CorpNet.

2. Open a corporate bank account

After you have formed your LLC or other business entity and received an employer identification number from the federal government, you can open a business bank account. Obtaining a business checking account provides a home for your business finances and a dedicated location for your business profits. Some of the best business checking accounts even pay interest. You can also apply for a business credit card to help you pay your bills and manage your business expenses.

Opening a business bank account is usually not that difficult, as long as you have an employer identification number for your business. This is a big step for the bank to take against you, so your business will have its own legal identity for tax purposes. And keep in mind that if you’re a new business owner, you may need to personally guarantee your business credit card.

3. Get a small business loan

Because your business (new) does not have its own credit history, it may be difficult to get a small business loan. Many banks prefer to see several years of earnings and tax returns before offering your company a traditional small business loan.

Small Business Administration (SBA) loans are another option if you can’t get approved for a traditional bank small business loan, but the underwriting process can be slow. If you qualify, you may also consider a non-bank alternative lender (or “platform lender”) that issues small business loans and lines of credit online with faster underwriting and more immediate approval. However, keep in mind that platform lenders may charge higher interest rates than traditional bank business loans.

4. Business Marketing

Perhaps the most important challenges when starting a business are sales, marketing your business, and acquiring customers. Even if you already have a strong product-market fit or the products you sell are already in high demand, you should make marketing and sales your full-time job as a business owner.

Here are three key small business marketing concepts to keep in mind:

1. Retaining existing customers is cheaper than finding new ones.

The cost of acquiring a new customer is often much higher than simply keeping existing customers happy. Repeat business and word-of-mouth referrals are invaluable. If your current customer base likes your business, they will tell the world about you.

2. Automate your marketing but maintain a human touch

There are great marketing automation software tools to help you send emails, track customer relationships, manage social media, and more. But don’t outsource everything to software. Make it easy for your customers to talk to real people. Continue to provide human-centered service that makes people feel appreciated.

3. Marketing is learning

The more you know about your customers and market, the better. What do people need now? What are people complaining about? What problems and “pain points” can your business solve? The faster you learn, the more you can sell.

conclusion

Starting a business is one of life’s greatest adventures and one of the most exciting learning experiences 24 hours a day. It’s not always easy and sometimes it can be lonely, difficult and exhausting. But like any other loving endeavor, the rewards you get from it are (hopefully) worth the blood, sweat, and tears you put in.

And if your business is successful, if you can find a market for your product or service, if you can create a sustainable recurring revenue base… It’s one of the greatest feelings in the world. You will have one of the richest rewards: an independent and diverse source of income. And you will enjoy a lifestyle full of freedom that no boss can take away.

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