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Four Tough Decisions Entrepreneurs Will Inevitably Face (And How To Prepare For Them) Tough decisions have to be made on an almost daily basis, and therein lies one of the biggest challenges of being an entrepreneur.

By Neil Petch

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.

Business can be tremendously rewarding for the entrepreneur. I've had some great moments over the years, and I continue to look forward to future ones. But I'd be lying if I tried to paint the business world as anything other than a full contact chess match. Tough decisions have to be made on an almost daily basis, and therein lies one of the biggest challenges of being an entrepreneur.

Here's one way to sum it up: that thing that makes sense in your eyes might look like a foolish decision –or even an injustice– in the eyes of your staff, peers, clients, contacts, business partners, and others. If you are not thick-skinned enough to power through despite the resistance (and even ill will), you are going to have a lot of days where you just want to find a cave and hide away.

Today, I want to take a look at what I believe are some of the most difficult decisions that entrepreneurs will inevitably have to come up against at some point. To be clear, there is no easy way through many of these situations– nor is there a one-size-fits-all approach to handling them. As is often the case in business, it's simply a matter of weighing up your options and trusting your gut, then prepping yourself for the task at hand.

Related: The Identity Of Entrepreneurs As An Engine Of Growth

1. Firing

There's a saying in business that might sound a bit harsh, but makes good sense: "Hire slowly but fire quickly." There is often a tendency, particularly within young startups, to keep an employee on board despite things clearly not working out. Perhaps this is to justify the time and expense and resources that have gone into grooming the individual up to this point, but it is all too often due to the emotion (mainly fear) that prevents many otherwise capable entrepreneurs from taking the hard decision to let someone go.

Sometimes hires just don't work out, and sometimes people just change. Most of the time it is your gut that tells you right away when it is not working out, but it is your brain that makes the call on whether you are going to listen to your gut or not. Let's be clear that there is no benefit to be had by prolonging this process. The moment you, as the boss, conclude that an employee is not adding value (or even having a negative effect on your business), and it is clear that no form of intervention or "probationary period" is going to fix things, then terminate without hesitation.

And letting people go is of course not always just down to job performance. Sometimes your company might hit hard times, and you have no choice but to let go of good people. This is when things can get really tough, and I would be lying if I said this is not one of the hardest things a business owner must face. But again you have to move quickly with this. If you can find no other way to lower costs to weather the economic storm, or if you simply do not have enough work for the existing team and do not foresee that changing in the near term, then those high staff costs will threaten the very existence of your company.

2. Cutting ties with a client

In the early days of your startup you're extremely grateful for every single client that you have. You'll bend over backwards to keep them on your books – even if that means late nights or doing work outside of the contract at no additional charge. However, there will come a point when a client crosses the line, either demanding too much or being disrespectful. This can have a significant impact on your team's morale.

Make no mistake about it: a "bad client" can have an ugly impact on your staff, which can negatively impact your team's performance in the work they deliver for other clients. If the complaints become irrational and your team is getting fed up and the general chemistry is just off, then firing that client makes good business sense.

3. Breaking up with a business partner

If you founded your business with one or more partners, you probably know by now that some level of conflict is inevitable. What you are also probably aware of is that conflict is not a reason in itself to part ways with your partners.

Differences are perfectly natural, after all, as is the occasional heated discussion. But if you have reached the point where the level of conflict between you and your partner(s) is impacting company performance and prohibiting you from driving new initiatives to help grow your company, you have a serious problem on your hands.

If you do decide that parting ways is the only way, then I'm not going to lie to you, in most cases, you can expect a heavy dose of ugliness. As for how you do it, well, that depends on what you want at the end of it all. If you feel you've come as far as you can together and are happy to move on to a fresh challenge, then it's time to begin negotiating the sale of your stake to the partner (or partners) you wish to leave behind. Alternatively, you may want to stay and buy out your partner.

Yet another option could be to break the business up into two (or more) parts, and divide all clients and assets among you and your business associates. Again, these are going to be very painful discussions, and there is the potential for it to blow up in everyone's face as clients begin wondering what the heck is going on, but I've actually seen this scenario play out with others, and if done with the right amount of grace, once the dust settles things can actually work out ok for the new, separate entities.

Related: Married To The (Startup) Mob: Couples As Co-Founders

4. Downturn decisions

Now this is one business situation that can leave you feeling completely lacking control. Weathering an economic downturn is one the hardest things an entrepreneur will ever have to do, and it will have you calling on each and every one of your entrepreneurial skills– drive, resilience, passion, adaptability, spirit, and much more.

This first thing to do in this situation is to react quickly. Start by taking a long, hard look at your costs and highlight any immediate savings that can be made. You'd be surprised at how many ways there are to cut down on some of those fixed costs.

Now we touched on this above, and we will re-emphasize it here: In hard economic times, many companies do their best to avoid having to make staff cutbacks, but the reality is that when the economy takes a turn, there is likely to be a human cost. Tough times call for tough decisions, and if you have any staff working at less than an acceptable capacity, you have very little choice.

If losing staff isn't an option, consider freezing or eliminating bonuses, cutting back on employee perks until things improve, or even reducing salaries. Just remember that communication, as always, is key. Speak openly and honestly to staff as soon as you start experiencing problems, and what you'll find is a team that comes together. Tough times often bring out the best in us humans, and as long as all is transparent and all bosses are right there on the decks helping to weather the storm, your team might surprise you with a strength of morale that will make you proud.

Although there is a lot more to be said on this one, I'll leave you with some comments on general strategy. During the hard economic times I want you to focus on your existing customers like never before. Getting out there and winning new clients during these challenging periods is as difficult as it is costly, so focus on retaining the ones you have to avoid any further financial shortfall. I'm not saying your sales team shouldn't be out there pushing, but a dose of realism is required here, and that is that your existing customers are your best friends at this moment, and you want to show them that love.

Toughing it out

As with almost all business decisions, those that you are required to make in the scenarios I outlined above no doubt come with an element of risk. Even the bravest and surest among us will question whether they are making the right decision, or whether that decision will backfire badly, or what the right decision even is.

Given this scenario, remember this: in truth, there is not always a right or wrong way to deal with the situations above, and it has to be said that the big decisions you make won't always deliver the outcome you hoped for. But there is just as much to be learned from the successes as from the failures, and providing you assess all of the information available, explore every possible option, and then ultimately trust your instincts, you should have no reason to regret any course of action you decide to take.

Related: 10 Traits Of Successful Entrepreneurs

Neil Petch

Founder and Chairman, Virtugroup

Neil Petch actively assists over 300 entrepreneurs and startups to conceive, plan, and build their businesses on a monthly basis.

After launching Virtuzone as the first private company formation business in the region over 10 years ago, Neil has led the company to set up more than 16,000 businesses, making it the largest, fastest-growing and best-known setup operator in the Middle East.

As the chairman of the holding company, Virtugroup, Neil also leads VirtuVest, an in-house angel investment vehicle; Virtuzone Mainland, a provider of directorship services, corporate sponsorship and facilitator of local Dubai and Abu Dhabi company setups; and Next Generation Equity, a citizenship-by-investment firm. Virtugroup has invested in and supported the growth of multiple companies and delivered passports in over 10 different jurisdictions. Virtugroup also enjoys partnerships with Dubai FDI, the Chamber of Commerce, Dubai Holdings (ARN), VFS, Regus, Etisalat, KPMG, Aramex and Beehive, and has received awards from Arabian Business and Entrepreneur Magazine, among others.

In addition to starting up businesses, Neil has held leadership roles in several companies. He helped establish ITP, the largest media publishing house in the Gulf, which he oversaw growing from two to 600 employees. At ITP, he spearheaded the launch of over 60 digital and print titles, including Time Out, Harper’s Bazaar, Arabian Business, Ahlan and Grazia.

As Managing Director of ENG Media, Neil launched the Coast FM radio station and numerous magazines, including MediaWeek. For the last seven years, Neil has also served as Chairman of GMG, the world’s first interbank financial brokerage based out of Dubai, with offices in DIFC and London. Due to his extensive knowledge and expertise, Neil has been appointed a member of the ‘Ease of Banking’ panel organised by the Chamber of Commerce.

Having lived in over a dozen countries and with a career spanning over 25 years in the UAE, Neil has the ability to merge astute cultural insight with fresh thinking, leveraging his seasoned business acumen, intuition and black book to repeatedly bring ideas to living, breathing success stories.

Neil has appeared in BBC (Dubai Dreams) and ITV (Piers Morgan) features on Dubai, as well as programmes on BBC World and Sky. He has participated as a judge on the radio programme Falcons’ Lair, an entrepreneurship reality show loosely based on the BBC production Dragons’ Den, as well as a similar TV competition hosted by MAD Talks. He now hosts Starting Up on Dubai Eye 103.8FM, the only national weekly show for the startup community in the world’s startup capital.

Neil also lends his in-depth market insight to fellow entrepreneurs and helps cultivate Public Private Partnerships as a Task Force Member of the Advisory Council, a coalition of key decision-makers and prominent movers of the UAE business landscape, led by EMIR and the Ministry of Economy.

He is also a regular speaker, panelist, and economic commentator, specialising in the SME sector.

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