Embarking on the entrepreneurial journey requires a great deal of chutzpah, guts, diligence, and vision. You’ll need to conduct market research to find a product/service to offer and you’ll need to go through the birth pangs of getting your business from the drawing board to the market. However, starting the business is only half the battle. It takes even more work to keep the business alive and growing profitably. This piece looks at three of the biggest money challenges that small business owners face in the course of doing business.
Access to the right funding
It takes money to start a business and it takes even more money to grow/expand the business. The biggest problem facing business owners is how to access the right funding for growth. Of course, there are hundreds of funding sources available to small businesses – both from the governments, corporate, and public-private partnerships.
However, not all sources of funding are right for all businesses. For instance, some fledging small businesses might not even qualify for some loans right from the onset. In other instances, the repayment terms and interest payable on some loans will sound outrageous to a sane business owner.
You can solve the biggest funding needs by looking for creative ways to raise money for your business. For instance, instead of searching for an outright loan, you may apply for a business line of credit that gives you access to working capital to fill up seasonal cashflow gaps as needed. You may also want to consider alternative lending sources if you are having trouble accessing funding from traditional lenders.
Cash flow is an important business metric because of its direct effect on the survival and profitability of a small business. If you own/run a small business, you probably already know that cash must flow consistently; otherwise, you’ll start losing sleep. Cash flows in and out of a business as you pay suppliers and receive payments from customers.
However, a cash crunch starts to manifest when a business starts having problems with getting the money they are owed. The main reason cashflow problems is on this list is that cashflow issues in one small business often translates into cashflow issues for other small businesses along the chain of business interaction.
You can reduce the odds of cashflow woes by offering discounts on early payments. You can also consider invoice factoring so that you can access money even when your payments are being delayed.
Money management problems
If cash is flowing properly in your business, you won’t have to worry about cashflow problems. However, you’ll observe that you are not yet in the clear and you’ll need to start dealing with money management issues. The day-to-day operational management of a business is more than enough stress for a business owner but can’t afford to ignore the financial management activities that comes with owning a business.
As a business owner, you’ll need to sort issues arise on invoicing, receipts, and receivables. You’ll also need to work out the monthly, quarterly, and annual reports as well as the taxes to avoid getting a visit from the IRS.
For many small businesses in infancy, the owner/manager might be able to handle the important money management issues. However, your books will become more complex as your business grows; hence, it might be smarter to seek professional help (even on a contractual basis) to take help you handle your business books.