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The Major Pitfalls Faced by Young Entrepreneurs

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Launching an ambitious new venture is challenging even at the very best of times.

But for young entrepreneurs, especially those in Gen Z (born after the year 2000), running a business can have even more complications that make it difficult to get basic tasks done.

Whether it’s credit card age limitations or simply not being taken seriously by employees or vendors, young entrepreneurs must find ways to overcome these business challenges.

Identifying the Pitfalls

Today’s infographic comes to us from Insurance Quotes, and it identifies the pitfalls encountered by young entrepreneurs as well as some of youth’s most important advantages.

The Major Pitfalls Faced by Young Entrepreneurs

Millennials, in comparison to the generation before them, have been less entrepreneurial as a whole. In fact, only 24% of 20-34 year olds today are new entrepreneurs, compared to a 34% rate from two decades ago.

Gen Z, however, is looking to take the reins – and now, 72% of high schoolers say they want to start a business someday.

Pitfalls for Young Entrepreneurs

Despite this increased interest in entrepreneurship, Gen Z faces significant pitfalls that must be overcome:

Age Limits
Many small businesses use credit cards or bank loans for day-to-day purposes, whether they are for picking up small expenses, growth capital, or as cash flow buffers.

However, in the United States, you must be 21 years old to get a credit card without a cosigner or proof of regular income. For bank loans, that age requirement drops to 18, but even then a cosigner or good credit is usually required.

In the same vein, age restrictions can also make it hard for young people to network, since many conferences or events take place in licensed establishments like bars or casinos.

Age Discrimination
Vendors, colleagues, and employees may not take young entrepreneurs seriously. Sometimes stereotypes of young people being a certain way may persist, as well.

Passing Class
Young entrepreneurs must divide time between business and school, creating competing priorities.

Rookie Mistakes
Inexperience can also be an early enemy for young entrepreneurs – hiring friends (instead of qualified people), micromanaging, being overprotective of new ideas, or mixing business and personal finances can be just some mistakes made from a lack of experience.

Advantages of Youth

Despite the list of potential pitfalls, it’s also clear that youth can provide big benefits to an up-and-coming business owner.

Firstly, the barriers to entry of business today are lower than ever before. It’s now possible to sell almost anything online for next to nothing, and Gen Z is inherently knowledgeable when it comes to exploiting any new technologies.

Next, without families to provide for or mortgages to pay, young people also typically have fewer responsibilities. This sets them up to take on risks that might steer away more seasoned businesspeople.

Lastly, a lack of experience can also be a massive advantage if used correctly. Young people have no preconceptions of “how things should be”, and can use that to pull off new ideas that others simply couldn’t imagine. This naiveté is arguably a big part of how today’s modern giants like Airbnb and Facebook came to be.

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Business

How to Take the First Steps in Scaling Your Business

What are the roadblocks to achieving scale? We look at these growing pains, as well as the steps needed to get past them in scaling your business.

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How to Take the First Steps in Scaling Your Business

Most entrepreneurs are hungry to bring their company to the next level.

Whether they operate a family-run business or a rapidly evolving tech startup, there is always another milestone in sight. Business owners want to their companies to make an impact with their customers and communities, and they want to keep honing their craft.

But with 27.9 million small businesses in the United States alone, there is no shortage of competition for the same pieces of the pie.

How can you take steps in scaling your business, and do what your competitors are not willing to do?

Roadblocks to Scale

Today’s infographic comes to us from Brunner Consulting, and it breaks down common roadblocks to scaling as well as potential solutions to the problem of decision fatigue.

To begin, we’ll look at a poll of U.S. small business owners, which gives perspective on the challenges most often faced by companies with fewer than 10 employees:

  • Profitability (50%)
  • Hiring new employees (48%)
  • Growing revenue (41%)
  • Cash flow (38%)

Unless a business has deep pocketbooks or is venture-backed, there are several obstacles here that may prevent companies from scaling successfully.

A lack of profitability is an obvious limitation, but it’s also clear that revenue growth, cash flow, and adding new employees can be growing pains that may derail any long-term plans.

Decision Fatigue

Why is scaling your business so challenging?

It’s because most types of businesses are not really scalable to begin with. The only sustainable way to scale for most companies is to grow revenue while decreasing operating costs, and for many traditional small businesses (i.e. bakeries, restaurants, hardware stores, consulting, etc.) this can be incredibly difficult.

Even if you come up with a scalable business model, there is yet another obstacle that can prevent your from growing the right way: decision fatigue.

In a growing and evolving company, entrepreneurs can’t do everything – and when they try to make every big and small decision, it affects the quality of those decisions. It can lead to being unnecessarily risk averse, maintaining the status quo, or even avoiding decisions altogether.

Scaling Your Business: First Steps

For a business to grow, there has to be more than one decision-maker.

There are two main routes to this:

1. Delegate Responsibility
In a typical small business, employees find and diagnose problems, while owners focus on solving them. However, by delegating these day-to-day decisions to employees, it frees up owners to work on the big picture items that can fuel growth.

2. Play to Your Strengths
Entrepreneurs can’t do it all, so it’s best to play to your strengths. To do this, outsource business departments that are outside of your wheelhouse. Often those may include things like bookkeeping, marketing, customer service, or website design.

Decentralizing decision-making is one of the first steps in scaling your business – and no matter how you do this, it frees you to focus on the big problems.

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The World’s Best and Worst Places for Ease of Doing Business

In some countries, launching a business is easy. In others? It’s a hassle that is littered with bureaucracy, corruption, and a lack of basic services.

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The Best and Worst Places for Ease of Doing Business

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

When it comes to supporting new businesses, not all jurisdictions are created equal.

Whether it’s the basics, like hooking up electricity and registering the business, or more complex regulatory hurdles, your location can impact the success of your venture in a big way. What makes a country business-friendly, and where are the most hassle-free places to open up shop?

The Ease of Doing Business ranking, by World Bank, breaks countries’ complex regulatory ecosystems down into quantifiable components. The resulting index and ranking system is a global look at who’s making it easy to do business, and which countries are struggling.

A Global View of Doing Business

The visualization below looks at the score (0-100) of 190 economies around the world, as well as a spread between high and low scoring factors in the subindices. While two countries may have the same score, one might have a much wider “spread” which points to outlaying successes or serious challenges in their regulatory framework.

Luxembourg, for example, ranked number one in the Trading Across Borders factor, but 173rd in Getting Credit.

Note: click the graphic below of the full list to expand to a higher resolution.

ease of doing business chart data viz
View a high resolution version of this graphic.

Of the 190 economies covered in the report, New Zealand comes out on top for the third year in a row. Singapore and Denmark round out the top three.

The United States, whose ranking has been slipping in recent years, came in at 8th spot.

This ranking offers up some surprises, such as Macedonia and Georgia, which are both in the top 10. Georgia makes it easy to start a new business, and has the lowest number of procedures to get the process going.

Afghanistan had the biggest year-over-year score increase after making big strides in enhancing the legal framework for businesses.

Rwanda is ranked at a very respectable 29th place – the only low-income economy to crack the top 50.

Building the Index

The data for the ranking is compiled from over 12,500 expert contributors in 190 countries who deal with business regulations on a daily basis. The final score is based on the average of 11 factors:

  • Starting a business – Procedures, time, cost, and minimum capital to open a new business
  • Dealing with construction permits – Procedures, time, and cost to build a warehouse
  • Access to electricity – Procedures, time, and cost required to obtain an electricity connection for a new warehouse
  • Registering property – Procedures, time, and cost to register commercial real estate
  • Procuring credit – Strength of legal rights index, depth of credit information index
  • Protecting investors – Indices on the extent of disclosure, extent of director liability and ease of shareholder suits
  • Paying taxes – Number of taxes paid, total tax payable as share of gross profit, and hours per year spent preparing tax returns
  • Trading across borders – Number of documents, cost, and time necessary to import and export
  • Enforcing contracts – Procedures, time, and cost to enforce a debt contract
  • Resolving insolvency – The time, cost, and recovery rate (%) under bankruptcy proceeding
  • Labor market regulation – Flexibility in employment regulation and aspects of job quality

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