The small business owner is the backbone of our country’s economy representing most businesses and a significant share of the workforce. Different industries have their own set of challenges. This short list describes common challenges the small business owner often faces and provides helpful tips to be successful with these complications.
1. Cash Flow Problems
80% of businesses fail due to cash flow problems, according to www.smallbiztrends.com.
From not having enough capital to start the business to regular cash flow problems which may include outstanding accounts receivables, the small business owner faces many obstacles that may also include an inability to access loans. Business owners seeking a loan from a traditional financial institution may not qualify for the most attractive interest rates and often are limited to the amount of cash they are able to borrow. The amount of money the business needs during its first few years is often underestimated, and with many small business owners using limited personal funds, this can be problematic. The small business owner can alleviate some of these concerns by managing funds very carefully, limiting unnecessary expenses and increasing savings ensuring the financial stability of the company in case an unexpected expense occurs. Many financial institutions recommend obtaining a line of credit.
2.Hiring and retaining good employees
There is more to attracting job seekers than salary.
With unemployment rates at an all-time low, it is challenging for most employers to attract good talent. Small businesses may not have access to a human resources department or recruiters to aid in the job search. They also may not be able to compete with the benefit packages of mid to large size businesses. Turnover in a small business has a much stronger impact on the business and the employees, as a smaller staff may absorb even more responsibilities. Small business owners should be proactive in researching how much their competitors are paying for similar positions and be able to provide a similar hourly rate or salary. Many workers today seek an employer with a culture that they can really see themselves not only fitting in at, but thriving! Providing the opportunity to offer a positive work-life balance through flexible schedules and working remotely are ways to compete with larger employers ultimately resulting in attracting more qualified candidates and retaining talent.
The most successful small business owners are creative in managing their business with limited resources and can creatively problem solve.
Smaller business owners and their employees wear multiple different hats. Limited in resources, these organizations face challenges in completing mandatory operational tasks and running their business. Tasks that appear to be repetitive may not be a good source of resources for the business owner that needs to make the most of his or her precious time. Mandatory tasks that occur due to government regulations such as submitting payroll taxes and responding to worker’s compensation audits tend to make an owner feel overwhelmed. These tasks are typically not areas that he or she is an expert at. Successful small business owners evaluate processes such as payroll processing. They recognize the value that exists by outsourcing payroll to a trusted payroll provider. The owner is able to focus on operations with less distractions.
4. Not investing in a strong marketing and sales plan
The U.S. Small Business Administration reports that small businesses only spend 1.08% of revenues on advertising.
The small business may not have enough customers to reach its goals. Focusing on servicing its existing customers, there may not be enough time spent invested or dollars invested in lead generation. Lead generation creates a pipeline for prospective customers and ultimately business growth. The SBA states that the average budget is not a reasonable budget. What is a reasonable budget? Many factors go into defining a marketing budget, which includes understanding if the business is marketing to consumers or other businesses. Some industries have more competition or a larger profit margin and may require an even bigger budget. Startups may need to invest more in the beginning to gain brand recognition. Companies with limited budgets may want to spend time in developing a good social media presence or understand how their business can participate in local community events to gain brand recognition.
5. Not establishing a business plan and not revisiting the plan regularly
“Failing to plan is planning to fail” – Benjamin Franklin
The plan does not need to be extremely complicated but should provide a strategy to serve the business owner in setting goals and breaking those goals into manageable tasks with a timeline. A business plan prepares the business owner to identify both short- and long-term goals with specific strategies to achieve the goals of the organization. A business plan is typically required by financial institutions or investors. This document can be updated and changed as needed. Plans may need adjusted and are often necessary when structures change. Business plans are often found online with basic instructions to get you started.
PaySmart is a payroll provider located in Mechanicsburg, PA supporting small businesses in the Central PA region. PaySmart is dedicated to helping small businesses take care of all of their payroll needs. To learn more information about how PaySmart may provide payroll solutions please contact 717-766-1777. Our New Client Concierge is waiting for you.