Pitfalls of Small Businesses
Although challenges are common in the business world for companies or industries of any size, financial challenges often loom the largest when an organization is small to medium-sized. Good finances can keep a business running, but financial hardships and poor bottom lines are often the downfalls of almost entrepreneurial endeavors. Keeping your business finances on track isn’t a stroke of luck or even business genius. When you are able to understand the most common areas of financial pain for small companies, you can learn how to manage them and control the impact on your company.
1. Non-existent Cash Flow
Businesses across the board often have a struggle maintaining positive cash flow, and about 33% of businesses responding to a 2019 Small Business Trends report claimed that a lack of cash flow has been their biggest operating challenge. Regardless of what the market is doing or what kind of assets your company owns, your company cannot run unless you have cash. It takes your cold, hard cash to cover payroll costs, your office or property rents, as well as business taxes, vendor invoices, or costs for new supplies and inventory. If you aren’t keeping up with your cash flow on a weekly basis, it won’t take long before you get behind on staying cash flow positive. If you allow your customers about 30 days to pay their invoice, try shortening the time frame to a payment cycle of 15 days in order to improve how quickly you receive your cash in comparison to your timeline for meeting financial obligations. You may want to offer online or direct debit or credit card payment options in order to give create a more steady stream of income. You could also look into accepting PayPal, Apple Pay, or Fundbox for diversity in payments. Setting up automated payment reminders, small incentive discounts, or even late fees can help motivate your clients to be on-time with their payments.
2. Revising Your Budget
Your initial business plan and financial strategy would have laid out a budget, but sticking to that budget and revising it when it isn’t working out is a challenge for many small companies. Reviewing your budget allows you to keep a close eye on what is coming in and what is going out. The more detailed your expenses, you pinpoint areas of spending that can be consolidated or cut altogether in order to put your company back on financial track. You don’t need to wait until the end of a fiscal year to get your budget back in line. When you notice things are going in the wrong direction, take immediate action. You need to be realistic about your sources of income before your craft your initial budget or you will end up with problems early on in your operations. You should know your monthly expenses, both fixed and revolving if you are going to keep a watch on whether you are making enough or losing money. Always look for ways to trim the fat from your budget, and keep a savings account that can address emergency issues. When you are running low on cash or you don’t have enough left in the budget to improve your operations, consider working with an investor like Mark Stevens or a traditional lender to infuse capital into your company. This can help get your finances in order if you are behind, or it could give you the resources needed to expand your sales opportunities.
3. Ineffective Marketing
A lot of small business owners don’t have a formal business background, and many struggle with areas of marketing and advertising. One survey claims that 15% of business owners list these areas as top challenges in their management position. Fortunately, running a successful marketing campaign can now be done through social media or online advertising platforms like Facebook, Instagram, and Google. These are user-friendly options and extremely competitive. It can be difficult to keep up with the dollar-intensive campaigns of large corporations continually run, but without a strong market presence, your small business is going to fall way behind the competition. Even with the digital device integrations that are creating more convenient advertising routes, 22% of business owners say that find the resources and the time to manage their marketing needs is the biggest challenge of their business. Increases customer exposure translates into increased sales, and sometimes it takes some money to make some money. You don’t need to spend your cash reserves but work with a freelancer or social media specialist that can help craft SEO content, video and posts that attract attention and convert interest into customers. Improving your search results is an easy way to attract more attention to your products or services.
If your company’s financials look bleak, you could be in danger of losing your company or coming close to the point of no return. If you aren’t confident in your ability to run the finances, consider hiring a professional with experience or taking a class to help you understand the ins and outs of business finance.
