Solved: Top Financial Challenges Small Business Owners Face
For entrepreneurs with small businesses, the first few years are always the hardest when it comes to setting up services and getting tangible results. Yet, they’re also the most promising.
As the boss, you dedicate your energy to fulfilling your company’s vision, you collaborate with a team of persistent and hardworking employees, and you make sure that the services you’re giving are aligned with the company goals.
With that in mind, it’s essential to understand the obstacles you will face while running your business. Even the most promising ventures can fail because of a lapse in judgment or the lack of foresight.
To ensure that you have an efficient plan in motion, the first step is to pinpoint and acknowledge the issues that need fixing and the potential problems that need resolution. This way, it can empower you and your team to come up with practical ideas.
Below, we’ve listed down the most common financial challenges that small business owners face every day, as well as the smart and resourceful ways to solve them. The list can guide you on how you can plan for your company’s next round of financing.
Top Financial Challenges Small Business Owners Face
1. Poor budget planning that excludes daily expenses: It takes proper preparation to keep your business running, and you will need to take into account the budget for everyday expenses. Allocate your resources and distribute them to the right channels. Doing this should help you maintain day-to-day operations. Remember that your typical expenditures will include costs for marketing, payroll, rent, and production.
Think of ways to maximize your cash reserves. If clients and vendors pay late, communicate with them, incentivize early payments, and make it convenient for them to pay. You can streamline payment collection processes for faster settlements. You can also monitor payment disbursement schedules to adjust terms with partners.
2. Lack of cash flow and not enough starting capital: You will need the right and healthy amount of starting investment for your business to grow and thrive. With the right amount of money, you can participate in bigger projects that will allow room for business expansion.
If your starting capital isn’t enough, this could affect the company’s cash flow because acquiring funding from investors can get tricky. The solution is to create a solid plan that can identify and improve your company’s business credit score. It would be wise to enumerate how extra capital will be used to boost your business.
3. Failing to account for unexpected expenses: When your business is starting out, the unpredictable can happen. It could be that equipment gets damaged or your inventory gets stolen. There’s also a chance that the company is losing money with the work tools you purchased.
These unforeseen situations are considered as the leading financial challenge for small business owners, and it could be a source of a lot of stress. Ken Wentworth, the owner of Mr. Biz Solutions, suggests that looking at past records could help determine and predict what you need to spend for unexpected expenses.
Figure out how you can offset the cost of the unexpected crisis so that you can bounce back and bring balance to your budget again. You can try to decrease spending on a different aspect. For instance, you can cut back on marketing costs and find alternative solutions that would supplement it.
4. Marketing and advertising: For business owners, marketing is one of the top challenges because the environment has turned even more competitive in the last decade. Without the necessary capital, it’s difficult for small businesses to compete with big brands which make use of dollar-intensive marketing campaigns.
Because of this, most small businesses dismiss methods such as digital marketing because they think that it is futile—this is a misconception. These days, aggressive marketing isn’t the norm. Even without the advantage of big marketing techniques, a small business can still thrive and put out services and products to the public through creative means.
One way is by employing search engine optimization in creating content. You can put out a blog that organically attracts the interests of customers, thereby improving your company’s search engine results.
5. Difficulties in managing company finances: Most startups hire accounting experts to help deal and manage finances. If you’re knowledgeable in accounting, you can do the books yourself. However, hiring a bookkeeper to maintain your records regularly will mean taking the burden off your shoulders and trusting an expert to do the job.
You can hire an interim Chief Financial Officer to monitor your company’s budget and spending to make sure that it’s well taken care of. They can give guidance on business planning, discipline, and analysis while helping you reach your company’s long-term vision.
Keep in mind that you will hit a few road bumps on its way to success, but the key is always to anticipate and prepare for challenges that will befall. Don’t be afraid to think out of the box! The more resourceful your methods are, the easier it will be to overcome these financial challenges. All it takes is preparation and foresight.
Written by Barbara Davison