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10 Dangers of Becoming an Entrepreneur (and How to Face Them)

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October 21, 2020 8 min read

Opinions expressed by Entrepreneur contributors are their own.

Millions of people around the world dream of becoming an . Be your own boss, work your own hours, and get to sit back and relax while telling others what work needs to be done.

Now if only being an entrepreneur was that easy!

Venturing out on your own path to not only run your own but succeed at , is a lot of even if you are only choosing to do it in your spare time. However, by implementing a to handle the following dangers, you will have in place to “get your ducks in a row” before jumping into the business owner pond.

1. No steady paycheck 

All businesses must reinvest capital back into the company to allow for growth and it can take months, if not years to finally be able to pay yourself a steady wage.

Solution: It is recommended to have a minimum of 6 months of regular income saved before jumping into the business owner pond. Plan for the unexpected, as you may need to cut back to the bare necessities and live a minimalist lifestyle until your business venture becomes a success. Now you may not have to be so drastic but again…be prepared! 

2. Relying on cash flow

Your cash flow depends solely on the income from the sales of your products and/or services. So what happens if a client doesn’t pay their invoice on time? Do you have the capital to cover the daily expenses should unforeseen circumstances arise?

Solution: Have a strong business plan in place and the capital to back it before leaping into the business owner pond. Do your research. Secure reliable clients and know the costs of not only the daily operations, but also account for breakdowns, loss of clients, legal fees, market changes, technology advancements, and so much more. You should also have a collection agency you can use in your back pocket, so they can go after what is owed to you just in case.

Related: 17 Passive Income Ideas for Increasing Your Cash Flow

3. Market demand for your product and/or service

The marketplace can and does change very quickly. You must have a plan in place and be flexible enough to pivot your organization to match market demand. Perhaps you sell goat hand soap, but suddenly everyone wants non-animal based products. Do you have a backup plan?

Solution: Diversifying your products or services can be the key to ensuring market changes don’t crush your business.  Your business plan should also have a pre-planned exit strategy especially for “trendy” products. 

4. Time

As a business owner, your time quickly becomes swallowed up as you are the key to ideas, marketing, sales, prospecting, closing, etc. You are responsible for every detail surrounding your business from legalities to the final decisions and without time, you will quickly be overwhelmed and fall victim to

Solution: Remember to take time to unwind. Perhaps a set time at the end of the day to turn off your cell phone and close your laptop to focus on yourself and your family. Delegate responsibilities to employees you trust and get organized with a schedule so you never miss a deadline or suddenly feel overwhelmed or rushed.

5. Health 

Unlike working for someone else, you can no longer call your boss and request a sick day and expect business to run as usual as, without you, there is no business. Burnout, stress, and illness are hurdles every entrepreneur must face and they all can have detrimental effects on your health. 

Solution: Burning the candle at both ends may initially give your business a boost, however, you will quickly discover that sleeplessness, stress, and burnout have a detrimental affect on your thought process, ideas, and temperament hurting your business in the long run. It is important to always make time for you because a healthy you grows a healthy business.

Related: Startup Founders Can’t Afford to Ignore Mental Health

6. Employees

As a new entrepreneur, you likely will not have the initial capital investment needed for a large team of employees making it vital to either learn it all yourself or find and hire a small group of people who match your goals and energy. 

Solution: Do your research, ask tough questions, and don’t be afraid to hire on a trial basis with set deadlines for projects to ensure your employees are the right match for your business. You need people who match your business vision and when working with a small team, one wrong employee can drastically hurt deadlines and goals. Be prepared to fire if needed and trust your instincts. The right team is out there, don’t be afraid to recognize when it is not working and do what is needed to rectify it. 

7. Emotional 

Becoming your own boss is an exciting opportunity! Unfortunately, many startups also fail within the first year. Markets change, clients dry up, and you could face bankruptcy, legal action, and several other unforeseen circumstances that could cause an outstanding amount of emotional and physical stress.

Solution: Be prepared for downfalls and stress by having support systems, mentors, and plans in place to help your emotional well being during trying times. 

Have you accounted for your support system? Do you have someone who can listen, emphasize, and be your cheerleader? If not, I highly recommend you build that foundation from the start.

8. Competitor risk

Every business has competitors to compete with and you must be vigilant in learning the ins and outs of your competition while protecting your own business. There are several legal costs involved when it comes to your intellectual and proprietary rights as there are always going to be copycats out there who will attempt to steal your name, designs, etc. and market them as their own.

Solution: File trademarks, copyrights, and have professional legal contracts readily available for clients, staff, manufacturers, etc. to protect your interests. Your business is your baby…protect it!

9. Operational risk

IT technology systems, supply chains, record keeping, fraud, system maintenance, etc., all fall under operational risk and the more you neglect each system, the higher the risk of one or more failing. Record keeping for example must be done accurately and consistently to avoid errors on your books that could cost you thousands if not millions of dollars in fees or fines.

Solution: To mitigate operational risk, you may choose to hire a team to ensure your systems and internal workings are protected from fraud, hacking, etc., and always take the time to monitor and evaluate staff and systems at regular intervals to ensure you have the right people for the right job. 

10. Family

Sacrifice is essential in business. Sometimes you have to give one thing up in order to have the bandwidth for something more important. Family should not be sacrificed but it often is. Trying to have a balance between being an entrepreneur and a mom as an example doesn’t really exist. 

Solution: Preparing your family in advance of your goals and time away will help them understand that you may not make it to every game, or family dinner. Inviting them to join in your journey can be educational for them as well so allow them to be your ambassadors! 

Taking on each day as it comes and choosing to be flexible in the moment will allow you to eliminate the stress and guilt you may feel for being so distant. It’s not about balance, it’s about fulfilling your needs, by making a choice in that moment, of that day for what will fulfill your spirit.

Related: How To Tell If Your Work-Life Balance Is Messed Up

I am always reminded of the story behind a hot dog vendor. Seems like a simple investment, but let’s break it down. 5-6K for the cart and 4k per year for the permit totaling a 10K investment upfront for a simple hot dog cart and you have yet to purchase hotdogs to sell or put aside money for unforeseen expenses such as machinery breakdowns, advertising, and more!

This is only the beginning of the total investment. You must have a full understanding of how long until you make a profit. How many hotdogs must you sell before you are able to pay yourself a wage and reinvest in your business? What about or circumstances beyond your control such as weather that may limit your sales dramatically.

In short, becoming your own boss on the road to being a successful entrepreneur has many dangers, however, by implementing a strong business plan, understanding and reacting to the inherent dangers, creating a support team, and having a strong knowledge of the capital investment, time, and energy involved you will be able to respond to risks with a clear plan in place minimizing the risk of failure.

Now that you have a clear understanding of some of the risks to entrepreneurship, go out there and give it all you got because there is nothing better than being your own boss and making your dreams come true!

 

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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