Regardless of size, most businesses face many of the same challenges every day. Maximizing profits, finding new customers, and hiring talented staff are common issues for both small businesses and large corporations. Then there are challenges that are unique to small businesses, like building a brand on a shoestring budget and juggling multiple responsibilities.
At Summit Financial Resources, we have found that one of the biggest challenges our small business clients encounter is going into business without considering the challenges ahead. To be successful, entrepreneurs must understand that problems are an everyday part of doing business, and they must be prepared to handle whatever comes their way.
Here are five common challenges small businesses owners encounter, and some suggestions on how to address them.
1 – Money Management
Many eager entrepreneurs start a business with limited capital, assuming they will earn big and then invest that money in their business. However, it is the rare small business that turns a profit overnight. Before starting out, experts advise that you have enough money to sustain your business for up to two years, which is when the average small business can expect to generate a profit.
Having enough cash to cover the bills is critical for the success of any business. Small business owners often find it difficult to access the working capital they need to cover day-to-day operations, purchase inventory or equipment, and pay their employees. Many small businesses don’t qualify for the economic programs and incentives available. It’s also challenging for new and smaller businesses to build up credit and provide the financials required by banks to secure business loans and lines of credit.
Summit Financial Resources welcomes a challenge. We’ll put our expertise to work to determine the optimal funding choice to help your small business grow. We offer invoice factoring, asset-based loans, inventory financing, and equipment term loans in a broad range of industries, including manufacturing, freight and trucking, distribution and wholesale, and professional services. We structure our credit facilities based on your needs, allowing for maximum flexibility and minimum restrictions.
2 – Time Management
Small business owners are notorious for wearing too many hats. You have to manage all aspects of your business, functioning as the CEO, sales manager, accountant, marketing director, and administrator. Many business owners, even successful ones, find themselves working longer hours than their employees worrying that the business will come to a halt if they take time off.
The hours, the work, and the constant pressure can tax even the most passionate entrepreneur. Fatigue can result in making poor business decisions or even the desire to close your doors altogether. Finding a pace that keeps the business humming without wearing you down is a challenge you will grapple with early and often as your business evolves.
Managing your time wisely is essential. Ensure that the schedule you are making is achievable and stick to it. Give yourself enough time to perform tasks with accuracy. Plan projects in advance to ensure that things are done on time. Make adjustments accordingly.
Utilizing tools like Google calendar and project planners can help you avoid missing critical deadlines. Invest in a great accountant to help you manage your books and help with taxes. Spending time effectively can actually save you money in the long run and allow you to focus on generating more revenue.
3 – Getting (and Keeping) Customers
One of the biggest challenges for any business is finding and retaining profitable clients and customers. This is especially true for small businesses that often operate with limited staff and marketing budgets, making it difficult to connect with a large audience.
Potential customers may be hesitant to work with a small business, preferring a company that has a proven track record and a large customer following. However, bigger companies often charge more, providing you with opportunities to attract customers who are looking to pay less for good quality products or services.
Prospecting is a daily, weekly, and monthly challenge for every entrepreneur. Creating a system for finding new customers is critical. For the majority of business owners, this means building a referral network that sustains the ebbs and flows of their business. Providing excellent service will help ensure that they remain your customers and recommend you to others.
Diversifying your client base is also essential to growing your business. If a single client makes up more than 50 percent of your income, this can be a short-term boon, especially if they pay on time, but it can also become a long-term liability if you find yourself acting as a sub-contractor for the customer and they stop paying or decide to take their business elsewhere.
4 – Hiring Employees
For many small businesses, hiring the right staff – and the right number of staff – is as important as growing revenue. Small businesses often operate with a skeleton crew, making it critical to hire employees with the skills and commitment to help your business grow.
Finding top talent can be tough, especially if your options are confined to a small geographical area. You may be competing with larger businesses for the same employees and with limited funds. Today, more and more highly skilled people are opting to start their own small businesses rather than working for someone else. It’s also not easy to know when to hire an employee or if your business can maintain the growth needed to keep them on the payroll.
Invest some time researching what employees are looking for. If you can’t compete with salary, be creative and offer exceptional benefits. Provide incentives like the chance to partner in building the business and growing with you.
5 – Trying to Go It Alone
Entrepreneurs tend to believe that they can manage everything and don’t need any advice or help. While at first this may seem like a successful and money-saving strategy, it can take its toll as the workload gradually increases.
Many small businesses suffer as a result of the owner being unable to let go of certain decisions and responsibilities as the business grows. Mistakes can multiply and quality can decline, costing you time, money, and customers in the long run.
Breaking free from the mentality that you have to do it all yourself is a struggle for small business owners, but asking for help is not a sign of weakness. Enlist colleagues or service providers who can quickly take care of problems that may take you days to resolve on your own. Consider hiring professional consultants or two to three key employees to whom you can delegate time-consuming tasks. It will be a short-term expense but a wise investment in your company’s future.
At Summit Financial Resources, we know first-hand that being a small business owner isn’t always easy, but we wouldn’t have it any other way. Like you, we see every challenge as an opportunity to grow; and we know that the passion and competitive spirit that drove you to start your business also provides the motivation to meet obstacles head-on.
Working Capital Financing is a few clicks away.
Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.