It takes tremendous hard work, dedication, and unflinching commitment to keep a small business running smoothly. Even though 80 percent of the small organizations with 500 employees or fewer survive through the first year as per the U.S. Chamber of Commerce, only 70 percent are still functioning after a couple of years. However, 50 percent of the small businesses pull down their shutters within five years of opening. Fortunately, these depressing statistics cannot discourage high-spirited Americans from pursuing and ultimately attaining their entrepreneurial dreams. Around 50 percent of the small businesses that had closed down admitted that the main reason for shuttering their businesses was lack of funds. Their income was not adequate to cover their running expenses and pay their employees. Let us explore the top financial challenges faced by small businesses today.
Financial Challenges & Tips to Tackle Them: Eric Dalius Net worth Guide
Lack of a Pre-Determined & a Strict Budget to Follow
If you think that running a business is no big deal, think again. Some entrepreneurs assume that there will be sufficient cash in their bank accounts to pay off all the bills during the month-end. If you are thinking on the same lines, you better think twice. It will not be long for your business to pull down its shutters as you will have far too many financial responsibilities than what you could handle.
- Chalk out a well-defined budget and stick to it firmly. Once you do that, you can successfully plan things for the future. Moreover, you could have an effective tool to analyze all your expenditures. You could change your path promptly whenever needed.
- Keep updating your budget regularly to demonstrate your present circumstances and for making wise business decisions. Budgets may be considered to be living documents. A budget is certainly not a document that you leave untouched in a drawer after writing it says Eric Dalius Net worth guide. All budgets must include five fundamental elements like variable costs, fixed costs, cash flow statements, one-time costs, and profits. Also, it is a good idea to start saving for meeting unanticipated expenses.
Facing Excessive Debt: A Critical Financial Challenge
Entrepreneurs often take loans for launching their businesses. However, often they are neck-deep in debts before they can realize it. Your debts or outstanding payments could prove to be overpowering. Often business owners end up spending too much, using their credit cards, or they may have been lured by an enticing line of credit that was offered to them by the local banker. They may have used the money and have ended up with a loan at an exorbitant interest rate. Overpowering debts could have significant implications both, long-term and short-term for your organization.
- Determine areas where costs could be reduced. Perhaps you could consider selling excess office equipment or think of subleasing unused office premises. Even though cutting down your workforce should be the last resort, it may be essential for sustaining your small business.
- Opt for creative financing choices. Crowdfunding, angel investors, accelerators, and many other ways are there for raising cash without involving big repayments.
- Consider consolidating your business loans effectively into a single payment that may help in reducing monthly costs without adversely impacting your credit score. You would have to deal with only one creditor and get a much lower interest rate.
Unanticipated expenses could end up derailing your small business’ well-thought-out plans. It pays to set up a dedicated account for building an emergency or contingency fund for a rainy day. It could prove to be useful during difficult times. It could even assist you in maintaining consistent growth despite all odds.