Running a small business, let alone achieving success, is already a challenge by itself; having to stay on top of every unpredicted situation, solving whatever issues may arise, and being in charge of several people at the same time are all quite demanding duties to take control of. Going through rough times, financially speaking is, however, one of the most common situations that small businesses will endure from time to time.
Statistics tell us that 20% of small businesses fail after their first year of operations, while 50% must quit during their fifth year, and 80% will not make it past their first decade. We’re not going to lie; those numbers would definitely intimidate and deter most of us from ever wanting to embark on the journey of having our own company. It shouldn’t be the case, though, as any challenge we face should help us learn from the experience, and in the world of business, as in life, what doesn’t kill us, or make us file for bankruptcy, will make us stronger.
It takes money to make money, they say, and here are 3 obstacles you are likely to face during the first couple of years as a business owner, and some tips on how to overcome them: finding the funds you need to run your business, keeping the flow of cash in movement, and how to manage your funds once you’ve got them.
One of the most common challenges we face during the early stages of our companies is obtaining funds in order for us to start and keep operations running. Traditionally, we would ask for a business loan or line of credit to help us cope with expenses, however recent years have shown that major financial institutions are still not willing to help those of us with a limited operating history or a low gross margin.
Luckily, though, there are non-traditional alternatives to which SMBs have access to nowadays, including smaller financing firms, online lenders, and even crowdfunding, which allow small businesses different benefits and more convenient payment options that a major bank would simply not consider.
Being able to access affordable funding is only one of the problems small business face regarding money. Having a positive cash flow to take care of immediate or near-future situations is another priority that no company can manage without. Ensuring your employees’ timely payment, and a rainy day fund are key elements of a company that will keep working well, regardless of temporary hardships or rough patches.
However, when our cash flow starts to hit the red numbers, even when a future forecast seems to be all green, it is important to make sure we have a Plan B to implement. Invoice factoring is a great alternative for small and medium-sized businesses that have a number of clients unwilling or unable to cover the full payment of their bills in time.
Once we have found the proper funding to ensure our liquidity and potential growth as a business, being able to properly manage such funds is crucial and will determine whether we are ready to take the next step for our enterprise, or if we should start looking for financial equivalents to a lifeboat. Cash might be flowing into our business from many different sources, such as funders, patrons, loans, credits, investors and what not, and in addition to bills, taxes, and salaries, our payment due dates will be many, and most likely, fall during different times of the month.
Besides, we want to make sure all our funding is being properly directed to where it should be, which is why it is always recommended to hire a professional accountant or financial advisor that can keep our books and focus on them, thus avoiding falling into a pitfall that could mean the end of our company, being forced to watch it sink slowly, from afar, broken into pieces, knowing that it could have been avoided all along.