In 2020, it was estimated that there were over 213 million companies throughout the whole world. Of that number, around 212 million companies were small and medium enterprises (SMEs).
Compared to larger companies, small businesses have many more struggles. From cash infusions to marketing and advertising to unforeseen expenses – running a small business is not an easy task.
There are really numerous hurdles small businesses have to overcome to be successful. In this post, we’ll disclose 3 of the most familiar financial challenges for small enterprises.
Initial Capital
For every small business, the initial capital is the top issue they face.
Having a knack for business and a starting idea is one thing, but having the capital to jump-start it is where the problem arises. In most cases, the working capital is what deters potential small business owners from taking a leap of faith and starting up a company.
Some small companies may be fortunate enough to attract angel investors to fund their operations. Others that have not had that luck turn to bank loans and max out their credit cards.
If you’re the owner of a small business looking for extra working capital, you first need to check your business credit score. Business owners that know their credit score have a higher chance of becoming approved for a credit line, a loan from a bank, or other financial aid.
In the end, there are many associations or groups that can be the financial helping hand you need.
If you need help facing your financial challenges, you can take a step forward and make your readiness journey a success on Fastbull.
Cash Flow
Whether you have just begun your entrepreneurial journey as a small business or have already established a company and been running it for several years, cash flow always remains an open issue.
In simple terms, the cash flow estimates the quantity of money entering and leaving a business – it is the most important indicator of a company’s well-being, finance-wise. Irregular cash flows can be detrimental to a business – it causes all the major concerns for business owners since inconsistent cash flow is a clear sign that the company may collapse.
If your business sees more cash going out than coming into it, it’s time for a cash infusion to keep your business, small or corporate, afloat.
Luckily, there are many ways to boost a company’s cash flow quickly. Dedicating more attention to the management of the account receivable balances is one way of raising cash flow. Another thing you can do to boost the cash flow into your business is to up your inventory managing skills.
If you have storage packed with materials and products that don’t roll out easily, you are working with “locked money” – money you have given in products but have no way of getting back. A way to avoid this is to limit the amount of inventory to the bare essentials so that more cash goes into the business itself.
Also, keeping a cash flow journal every week is another way to manage the lack of cash flow. Consult the numbers – see your sales score, the number of purchases you’ve made, and the ratio of money owned and money owed to you.
Lastly, you can also estimate the free cash flow – the money that’s left after you have settled all your bills.
Advertising and Marketing
A well-thought-out advertising campaign can go a long way for your small business. Reaching your target audience today has never been easier – the whole world is online.
Placing your business in the digital world can really boost your brand. People will be able to find you easily, which, in turn, will increase sales and contribute to the rise in cash flow.
One sure way to do so is by using various social media platforms. Depending on your target customers, you can focus on one platform or spread around several. By setting up a social media account for your business, you can appeal to more than 4.62 billion social media users worldwide.
Another alternative is to employ a marketing agency. Most small businesses fail to attract the right customers because they simply don’t know how to do marketing research. That is why investing in proper market analysis and an attractive advertising campaign can go a long way for small businesses.
Conclusion: The Financial Challenges of Small Businesses
Deciding to try your luck as a small business owner means being ready to invest your time and money in something you believe can yield profit.
From attaining working capital and ensuring constant cash flow to employing the right advertising tactics – there will always be financial challenges.
Being aware of the ones that might await you and tailoring your work tactics according to them is the first step toward becoming a true small business owner.
