Running a small business comes with its own set of challenges, but none are as impactful as financial hardship. Even if you’ve conjured up the idea of a lifetime, managing your finances isn’t always easy. Thankfully, there are plenty of ways for small business owners to overcome these financial hardships and focus on completing their goals. Here are common small business money struggles and what to do about them.
Not Enough Capital Funding
The amount of money you need to start a business varies by industry, but many share the same issue of lacking adequate funding. Once you’ve opened a shop, covering operating costs until you make a profit can be a struggle. Businesses interested in capital funding can look for small business loans, apply for venture from investors or even turn to self-funding. Taking out personal loans can be used to get your finances in order so it may be easier to qualify for a business loan through the SBA.
Limited Marketing Budget
The budgeting process can be complicated, even for a small business with limited clients. You may be pulling in just enough to cover your biggest costs, which leaves little room to invest in marketing. Suddenly you find yourself at a Catch-22. You know the essential elements of a digital marketing strategy that lead to growth, but you can’t grow without an adequate marketing budget. The solution? Optimize your site for SEO as much as possible and perform most marketing efforts solo.
When it comes to paid advertising, do your research ahead of time. Avoid trying to rank for broad keywords, like “women’s t-shirts”, as these don’t offer any major conversion potential for a small brand. If you decide to borrow through personal loans, you can use a portion of it to freelance your digital marketing to a pro who knows how to optimize your ads for the greatest success.
Spending Exceeding Income
It’s normal for small businesses to cost more than they earn the first few months. However, if cashflow doesn’t increase, you could wind up watching your revenue get caught in an unprofitable loop with your expenses. When costs are higher than revenue, you have to shift gears and identify how much you need to increase profits to break even. This may happen through limited time offers or exclusive deals that encourage faster conversions. In some cases, lowering your prices can actually lead to more purchases. Your revenue is driven by three factors:
- Visibility
- Brand positioning
- Cost
The profit (your take home income) is optimized when you balance your revenue and expenses. To start increasing revenue, the first thing you can do is look at your current target audience’s visibility. Are they encountering your brand at the right time? Sometimes, advertising material may not be the problem. Instead, it could be when people are seeing it.
Geographical location is one factor, but the real consideration should be the buyer’s journey. This is the process someone takes from first deciding to buy something all the way through research and purchase. Carefully examine your business from the eyes of a potential buyer. What touchpoints are you missing, and how can you improve them?
Inefficient Task Management
It is commonly known that the initial employees of any startup are going to wear many hats in terms of their daily tasks. This is typically part of the draw for working for a startup. Those that enjoy variation in their tasks and the thrill of a fast pace, gravitate towards startups so that they can capture that energy and use it to drive the business forward.
As the business owner however, it can severely tank your payroll if you are not paying close attention to how you manage your team members, their time, and their tasks. Are you employing multiple administrative employees to do the work that one automated software program could handle? Investing in technology can be off putting since in many cases, the costs are significant.
However, think about this in terms of your annual, or even quarterly numbers. What is the difference between what you would pay one or multiple people versus the cost of implementing the software? Many times, the cost savings is evident and one huge benefit is that now you have freed up some people power to allocate elsewhere in your operations.
Novice Bookkeeping Solutions
As the owner of a small business, it can feel scary to outsource tasks from the jump. This is something that many feel eats into their profits, and from the outside looking in, tasks that entrepreneurs feel they can personally manage without outside assistance. In some areas this proves true, but in areas like your financials and bookkeeping, it is best to be honest and realistic with yourself in terms of not only your bandwidth to tackle the projects but your knowledge of the details that are involved.
Maybe you are not ready to hire or appoint a CFO but considering the financial support of an accountant or on-site bookkeeper is going to be worth your while. These professionals will be dedicated solely to the profitability of your business, so while you are putting out fires in other areas, you can rest assured that your money is being managed responsibly and efficiently.
Even things like tax prep can get overwhelming when you do not have the experience or knowledge of doing so for a business. Save yourself the headache and potential for mistakes and get in front of your financial management from the start.