5 Biggest Financial Obstacles for a Small Business (And How to Overcome Them)


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Desk, Work, Business, Office, Finance, Documents Small businesses account for the vast majority of all business endeavors on a global scale, and precisely for the level of competition, their issues tend to be quite challenging. Only one third of all small companies will live to see their eleventh anniversary, while almost half of all cyber-attacks target precisely small businesses, and startup capital is $10,000 on average – all of which simply means that with a lack of funds, with statistical probabilities of survival not in their favor, and the digital world being so competitive, it’s no wonder small businesses face many financing issues.

However, as time goes by, we learn from our own mistakes. So, if you’re starting your own business and you’re about to enter the market, start taking notes on what obstacles you can expect in your financing department, and the best ways to tackle them before they wreak havoc on your business.

Misplaced investments

For a new business owner, everything can easily be classified as a priority. From obtaining highly-qualified employees, proper equipment for the office, insurance, all the way to investing in marketing, these and many other expenditures are more than justified for a small business looking to grow. This is where too many brands fail to prioritize in a strategic, long-term manner: how you allocate your funds now will deeply impact the ROI of those small investments that stay in-house.

Perhaps outsourcing may work better instead of full-time employees until you have a steady influx of work. Then again, some marketing methods are less pricy and very applicable for small businesses, so you could mix and match between a range of options that can deliver better results without depleting your budget. If you’re not a financial expert, take advice from one and make sure your first steps are wise and each investment worthy.

Late client payments

Even brands that do everything by the book when it comes to budget allocation can suffer at the hand of clients who either have issues with their own suppliers and vendors, or they simply fail to pay their invoices. In these instances, it can help keep your business afloat and growing if you implement a direct debit system to automate your recurring billing and manage the collection of any failed payments.

When you automate such an unpleasant and potentially time-consuming process, you can focus on other ways to nurture your business. Among other issues, failed payments can play havoc on your cash flow, as well as your relationships with your own vendors when you cannot pay them in time. For the sake of your peace of mind and greater control of invoicing and billing, this system can help any small business master the art of finances.

Poor funding opportunities

Notorious for their lack of choices, small businesses are often based on a mix of personal savings, family loans, and a wide range of other, unstable options. With so many companies fighting for that one grant or bank loan, not every market can scale as effectively and efficiently as it would like to, which is a high price to pay for a small business trying to make it.

Have you tried looking into some of the more contemporary modes of loaning and funding, such as crowd-sourcing, which is a godsend for startups, or perhaps alternative loan companies that work independently from banks? These may very well be ideal for your situation, if you cannot find an angel investor or a bank loan that will help you get your business off the ground. Another option would be to open your doors to investors from a range of realms who would have a say in how you run your business, or partner up with an already established company that can benefit from your partnership as much as you would.

Managing cash flow

Long-term finances are certainly not the only aspect of small business financing that can affect your bottom line. As we’ve seen with late payments, other bottlenecks, leaks in your funding, and excess expenses can cause the same strain on your cash flow so that your business starts needing more money that it can genuinely produce. A self-sustainable company is the only one worth running in the current climate, and even though it takes time to get there, managing your cash flow is a significant part of that battle.

If necessary, make sure to keep a line of credit that can ensure ongoing financial support in case of any cash flow struggles. Then again, the direct debit approach will also come in handy for this particular issue, to make sure that most, if not all of your outstanding customer payments are completed successfully, thus taking the load off your cash flow.

Lack of emergency funds

Finally, too many modern companies rely solely on their company profit to run a business, and for a while, it makes sense to re-invest your profits until you can safely say you’re out of that initial, most sensitive phase. However, companies sometimes face lawsuits, complaints, drops in interest, and external catastrophes such as earthquakes that cannot always be foreseen. This is why every business needs an emergency fund, to help you out of such unfortunate circumstances and back on your feet.

Whether you procure insurance for everything you own and do, or you combine insurance with an actual savings account specifically for those situations, you cannot go wrong with saving for a rainy day.

Truth be told, financial troubles always find their way into the market, and your business will likely encounter a fair share of them as you grow. These tips, however, should serve you well as you strive to move forward, so make sure to implement them and keep learning as you build your business for a solvent future.

Elaine Bennett is a digital marketing specialist focused on helping startups and small businesses grow. Besides that, she's a regular contributor for Bizzmark Blog and writes hands-on articles about business and marketing, as it allows her to reach even more people and help them on their business journey.
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