The 3 Biggest Challenges That Small Business Owners Face in 2018

No votes yet.
Please wait...

small business entrepreneur challengesChallenges faced by small business owners in performing day-to-day operations range from funding payrolls to arranging funds for business endeavors. For most of the small business owners, the biggest challenge is likely monthly expenses versus income. But now with three federal rate hikes, the situation is likely to become more difficult to access credit.

The survival path for small businesses has not changed much. According to www.sba.gov, about two-thirds of businesses survive 2 years in business, half of all businesses will survive 5 years, and one-third will survive 10. The following are the common challenges that can affect the lifespan on your business:

Raising Business Capital

  • If you are an aspiring entrepreneur planning to start a business, you would already be aware that raising business capital is one of the toughest challenges businessmen face. Despite a wide variety of financing options, small businesses fail to secure credit lines and loans.
  • Being a novice, you should have a solid financial plan; without one, investors will be disinterested to fund your ideas. Banks also look for credit score, and having no credit history or low credit score can impact their lending decisions.
  • Traditional banks offer loans only against good collateral. And without one, small business owners have to look for alternate financial resources. Online lenders, on the other hand, do provide loan without collateral but with high-interest rates and should be avoided.

Cash flow Management

  • Jessie Hagen of U.S. Bank cited that 82% small businesses fail because of poor cash flow management skills or poor understanding of cash flow. The report also states that 79% of small businesses fail as they start with too little cash.
  • If your business is steadily spending more than the cash that comes in, it’s safe to assume your business has a cash flow problem.
  • With poor cash flow management, even profitable companies end in bankruptcy. Inefficiency in managing accounts receivables, accounts payables, not billing the customers on time, selling on large credit terms, 30, 60, or even 90-day terms, and having shorter payment terms with lenders can make your cash reserves inadequate.
  • With poor cash flow, a business may have to pass on growth opportunities; and at such a rate, will lose the competitive edge and soon be out of the market.

Balancing Quality and Growth

  • Drastic growth can sometimes have an adverse effect on quality of the business. Sometimes one might have to look beyond simply return-on-investment.
  • Small business owners may find it challenging to provide quality service when experiencing large scale growth over a short period of time. When a small business experiences rapid growth, it is important to realize that not every mail can be hand written and every phase of a project be tested manually. Tasks which can be automated to reduce the work load on the available resources needs to be looked at immediately to maintain a healthy balance between quality and growth.

Get in Touch






Recent Posts

X