The 5 Most Common Financial Challenges for Small Businesses Reviewed by Momizat on . With the global economy still far from buoyant and recovery slow across almost every sector, it’s not an easy time to be a small business owner. But overcoming With the global economy still far from buoyant and recovery slow across almost every sector, it’s not an easy time to be a small business owner. But overcoming Rating: 0
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The 5 Most Common Financial Challenges for Small Businesses

With the global economy still far from buoyant and recovery slow across almost every sector, it’s not an easy time to be a small business owner. But overcoming the hurdles facing small businesses today is as much about sound business practices as it is about understanding economic trends. Identifying the problems is a big step towards overcoming them, so here’s a list of some of the most common financial challenges for small businesses today.

1/ Capitalization

Many small businesses fail due to undercapitalization in their early stages, particularly if they initially undersell their products in order to attract customers. A common piece of advice for new businesses is to start with capital equivalent to the first year of projected revenue plus projected expenses. With bank lending increasingly tight, business owners should attempt to raise capital from a diversity of sources so they’re not overly dependent on any one lender. Sticking it all on credit cards is, it goes without saying, a recipe for disaster.

2/ Managing the Money

As well as making sure they have sufficient capital reserves, small business owners need to manage their cash flow with sound practices. Even if cash is scarce, not paying the bills on time can result in the loss of valuable clients or suppliers, and could also affect a business’ credit rating. A good understanding of business accounting is vital for balancing the books, necessary to keep both creditors and the taxman happy. Seeking professional advice and purchasing good accounting software should pay off in the long run.

small businesses

3/ Proper Planning…

Beyond money management, small businesses must create an effective long-term business strategy. Many businesses run into financial difficulties because they lack a clear-sighted plan for growth, together with contingency plans for when things go wrong. Without a proper plan, business owners may waste money on a short-term solution to a problem that does not address the underlying cause.

4/ And Execution

Of course, once a plan is drawn up, it’s important to execute it within the projected time frame. Research shows that most strategies developed by businesses are not actually carried out – a massive waste of resources for business owners. Small business owners must make sure their staff understand company strategy and can carry it out effectively. Performance measurements should also be in place to chart progress.

5/ Building an Effective Team

One common mistake small business owners often make is over-managing and being reluctant to delegate tasks to others. While it’s important to stay on top of every aspect of the business, owners who try to do everything will find themselves overstretched and exhausted. No business should be overly dependent on its founder, so hiring good staff and delegating effectively is a key ingredient to building a successful business.

Understanding the financial challenges faced by small businesses is a crucial first step to building a strong venture. Successful small business owners must rise to those challenges and enjoy overcoming them.

About The Author

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Muhammad Aamir is an avid learner and online marketing consulting. Including guest blogger, blog posts sailing and link building. Social Profiles: Twitter, Facebook, Google Plus Contact: muhammadaamir2013@gmail.com

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