09 Feb Small Businesses, Big Money Challenges
Starting a business is always a challenge. There are so many small business challenges. And there are so many factors to consider and these can hit at you physically, emotionally, mentally and financially. The last part causes the most stress among business people.
Here are some of the top small business money challenges.
Among these small business challenges, money management can be the hardest.
How do you manage the money situation when there is not a lot coming in? It is understood that most small businesses don’t earn much—at least not yet. But you cannot control the bills coming in. You cannot tell the utilities to adjust their billing because you still have not managed to earn at your maximum capability. You cannot ask your employees to sacrifice their monthly salary because you are not earning enough. The office supplies need to be replenished regularly as well.
So how do you manage? This is why loans are very popular among small businesses. You might need to take out a loan when you don’t have enough cash flow to pay for all your monthly responsibilities. Expected cash flow problem is the main reason why a lot of business owners keep the initial stages of operation within the family. Family members who have a stake in the business could do menial tasks in the first few months of business operation.
Having enough hands
Sometimes, you scrimp on hiring manpower because you are afraid you cannot afford to pay for the employment plus benefits. On the other hand, the hands may be crucial for the proper operations of a business. So what do you do? So this is another financial challenge in operating a small business. You have to think about it seriously. If additional manpower is very important, to the point where business will suffer without that additional personnel, then the answer is pretty clear: you have to hire that person no matter the cost.
Starting a business is an investment. So to mitigate some of these small business challenges, you should know before you jump that you will have to spend quite a large amount of money for it. In fact, there is always that big talk about a capital, which is one of the most important considerations when starting a business.
For a small business with just a handful of employees, increasing profits is always a big hurdle. Because you are always in the lookout for expenses, you don’t spend much on marketing or advertising. And because you want to earn enough to keep the business afloat, you are most likely afraid to lower down the prices of your products or services.
Sometimes, though, you just have to be wise about how you handle the business. While it is important to invest in marketing and advertising, you don’t really have to spend thousands on those anymore. With social media, you have a chance to reach thousands of people without spending for much—unless you boost your social media ad.
Innovation is very important. You have to maximize gains despite minimum financial input. You have to always be a step ahead of the competition.
The Affordable Care Act is a commendable program of former President Barack Obama. The aim of the law is to provide healthcare to the general population. This is well and good, especially for the people living within and under the poverty line. But in reality, this is a burden for small business owners. Small businesses shoulder a higher cost of healthcare insurance for their employees with Obamacare. It was estimated in 2014 that 11 million employees experienced an increase in insurance premiums. The dilemma here is that these small businesses would have to find ways to pay for the added insurance premium. How are you supposed to do that? By increasing the prices of products and services. This is always bad news for the business because this entails the possibility of losing clients.
In some cases, business owners resort to cutting employee hours. This way, the amount they are supposed to pay employees for the hours rendered will be used to pay for the additional cost of health insurance. This would mean a decreased paycheck for employees every month. The danger is if the situation gets so dire that small businesses might be forced to close down. This would be terrible news since small businesses create two of the three additional jobs in the market. These small businesses also employ half of the workforce in America.
This is not a common problem, but there are some business owners who don’t keep track of the money they make, hence, don’t have an annual financial goal. Business owners of this mindset think that because it is their business, they don’t have to be too formal about it. So they don’t keep track of their finances—the annual gains, the expenses and the growth.
Failure to monitor financial activities means a lack of financial goal. It is important to set a goal for the business to keep you on track when operating the business. It also helps that you have something to achieve since this will make you want to work harder.
Separating business and personal finances
This is very logical and a lot of business owners know this. However, internalizing it may be a different thing. It may start as something innocent. You don’t have money so you take some from the business fund. You promise to repay the fund but you eventually forget about it. Then it happens again. The next thing you know, you’ve clipped thousands of dollars from your business fund. You might be the downfall of your own business.
The only way to solve this is for you to be disciplined and to know how to compartmentalize personal and business finances.
Keeping a small business at bay is difficult. There are too many challenges, but none more challenging than getting your finances in order. But if you really want to make the business prosper, you will defy the odds. You will find a way to survive all these challenges and even make a profit for the business. You just need to be smarter than the challenges.