Losing money is a situation many small businesses can’t afford. Poor investing decisions, mismanaged accounting, and misdirected marketing are just some of the ways companies can land themselves in tough water.
If you own a business, you’ve probably faced your own set of financial challenges – and these obstacles are not always easy to overcome.
How do you bounce back from business financial challenges and face them head-on? What are the most common problems that can interfere with your profit-making ability? In this article, we’ll break it down for you and help you get back on track to success.
Most Common Business Challenges
You’re facing a financial challenge as a business owner. So, what can you do about it?
First things first: Don’t panic. Realizing you’re in a precarious situation does not mean your business has failed. But it’s time to take action.
When you’re in deep with a financial problem, finding commonality with other businesses might seem futile now. You want to get out of the situation you’re in – as fast as possible. But understanding common types of business problems can help you identify why you’re in the position you’re in now.
There are different problems in every industry, but universal business problems usually stem from a lack of working capital.
Problems arise when the cost to run a business is higher than the value of its assets (property, inventory, and profit). Trying to pay back the difference can leave business owners scrounging and scrambling, and it can be tough to break out of the cycle.
Financial Troubles Perpetuate More Problems
Running a business is expensive. Unfortunately, a lot of new business owners don’t always understand how expensive business financial challenges can be.
Forming your business and handling regulations, taxes, and fees isn’t always a cheap process. Surprise expenses, like emergencies and repairs, can sprout up at any moment. Economic downfalls can occur at random. Inconsistent cash flow can also throw your business for a whirl.
If you have enough working capital, you might be able to ride out instability – but only for so long. Without stable income, the challenges you face will eventually lead to late payments, budget cuts, poorer quality in your services and products, unhappy clients, and so on.
What You Can Do
Identifying where things went wrong should be the first order of business. Otherwise, you can waste valuable time, money, and resources trying to solve the wrong problem.
- How much money are you bringing in?
- How much of that money is going towards your recurring expenses?
- What types of discretionary expenses are you accumulating?
- Have any surprise expenses reflected on your sales?
- How long does it take for clients to pay you?
- How much interest are you paying due to late payments?
Review Your Finances
If you’re not sure what the underlying issues are, pull up your records. Review your sales, expenses, assets, inventory, bank accounts, and anything related to your operations. Here are some examples of questions you should be asking as you review these items:
If poor bookkeeping is part of the problem, consider hiring an accountant. This is also an opportune time to reflect on your business plan.
The business model you’ve laid out should specify how you’ll generate profit. Are you making a profit and meeting your business goals? Are you making a profit in other ways? These are essential things to keep in mind as you come up with a solution.
Set a New Budget
Knowing where you stand financially is the only way to move forward. Once you’ve done that, it’s time to create a budget that’s going to help you catch up, handle future costs, and overcome the challenges you’re facing.
There’s no way around your recurring expenses, but there may be ways you can minimize them. Try cutting down on your utility and phone bills, and talk to your bank about adjusting your monthly rates. Economize your variable expenses, like traveling costs and raw materials, if it can help you make your recurring payments on time each month.
The budget you’ve laid out should align with your business plan goals. But if you’re still not generating profit, or if you don’t have a plan laid out at all, you need to take more drastic action.
Generate Cash Flow
Making a profit is a means to get out of financial difficulty – but it can be tricky. The best thing you can do is hone in on your strengths. Where you may be lacking in one area, you may be thriving in another, and it’s time to capitalize on that.
Which products and services are your hottest items? Can you afford to invest in building your stronger areas? Whether it’s hiring a new employee, pushing a best-selling product, or receiving payments sooner, make the change if it’s going to make you money sooner.
Another thing to consider is your audience. How effective are you at attracting new customers? How do you market and appeal to your ideal customer? A lack of exposure may be your biggest obstacle, and if so, it’s time to market yourself in ways that are going to generate interest in your brand.
Don’t Face Your Business Financial Challenges Alone
How you establish your business early on can make or break your future success. If you’re a new business in Wilkes-Barre, PA, we can help you start on the right path. We help developing companies to establish themselves in their communities and give them the fresh start they need to succeed.
If you’re struggling to overcome your business financial challenges, like legal issues and fines, we can also help. Contact Hoegen & Associates today to learn more about how we can assist you.