Every entrepreneur knows that all businesses come with risks, and sometimes, these risks can become unconquerable challenges for business owners. Most of these problems arise because of the financial difficulties that companies face. According to the research and surveys, 60% of small businesses fail because of economic issues in the first five years. These issues can become the biggest hindrance for any business if not solved at the right time.
What are the Top Financial Issues Small Businesses Have?
Running a small business is always challenging because the business owner is operating it on a small scale; however, the small financial challenges can amalgamate together and become large enough to cause severe problems in the future. Some of the top economic issues small businesses have:
- Inconsistency of Cash Flow: The cash flow problems that might seem minor at the beginning tend to become a serious and significant issue sooner or later for the business. Even profitable businesses can fail due to inconsistent cash flow. According to the research and Guidant Financial, 33% of small business owners have declared that cash flow is the biggest challenge that they must face for their business. Another alarming situation is the information provided by the U.S. Bank, which says that 82% of small businesses fail and cannot stay in the market for a more extended period due to cash flow problems. Thus, it needs to be given proper attention, which most small businesses ignore in their initial years.
- Excessive spending: Unnecessary or overspending can ruin the business in so many ways. Startups or new companies tend to overspend to look more successful and profitable than they are by having a fancy and oversized office, luxurious company vehicles, cellphones, top-of-the-line equipment or machinery, and many other unnecessary things items. It will eventually lead to an increase in the debts and cost of overheads for small businesses.
- Retaining Customers: Customer retention is another big challenge for small business owners. Returning the customers is necessary, or the business might even potentially fail because the customers can make or break the business. Studies show that increasing customer retention by 5% can help boost small business profits up to 95%; therefore, customer retention is much cheaper than customer acquisition.
- Raising capital: Raising capital can be highly challenging for small businesses, as can managing cash flow and retaining customers. Small businesses usually rely on personal savings for initial capital needs. Since many new startups begin with little money behind them, small firm owners typically have limited resources for funding their own businesses. Borrowing money from banks in the form of loans can result in high interest rates, which again can cause problems for them.
How to Overcome and Fix These Financial Challenges of Small Businesses?
Although small businesses are operating on a much smaller scale and in a less competitive environment, the above-mentioned financial challenges are enough to strangle the business to death. The following details will help to fix these issues:
- Creating a cash flow budget: A cash flow forecast, or budget, will help business owners easily estimate what amount of money should be flowing in and out. It will also help business owners to know when to spend money on expenses and when to cut them.
- Building a solid customer base: Leaving customers can be daunting because it can affect the business’s financial status. It is essential always to make them feel welcome, acknowledge their complaints, and overcome them to retain customers. Rewarding them for loyalty and offering discounts can be crucial as well. Moreover, using email marketing to stay in touch with them can help create satisfaction and a solid customer base.
- Finding investors: Angel investors are thought of as startup backers when raising capital becomes challenging. They are also known as private or seed investors. They are high-net-worth individuals who help startups or small businesses by financially backing them up in exchange for ownership equity in the company.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
