No company is immune from the consequences of mistakes, poor planning, or bad luck — no matter how big or successful. Here are four potential pitfalls your small business could face, and how you can avoid them.
Cash Flow Troubles
Cash flow is one of the most important aspects of a successful startup business. Eighty-two percent of small businesses that fail do so because of poor cash flow management skills. Late customer payments, seasonal fluctuations, emergency expenses, rising costs, and a number of other factors can create a cash crunch that threatens your company’s ability to survive and grow.
What can you do?
Start by filling out a cash flow statement using a template like this one, which can show you when and where money flows in and out of your business, and helps you forecast cash flow hazards — allowing you to plan accordingly. Cash flow tools can also help you better manage your business.
If you are short on cash, your business may have to cut costs, borrow, generate more income, or do some negotiating. Beyond putting money aside during your more prosperous months, explore what costs you can reasonably trim without hampering operations, and find creative, budget-conscious ways to market your services or goods.
The SBA suggests bartering, expanding sales to current customers, reducing inventory, using free communication tools like Skype, and reworking arrangements so you receive compensation sooner and can defer payments to vendors. You may also consider offering clients a discount for speedy payments.
Moving to less expensive digs or seeking better rental terms could leave you with more cash as well. And if you haven’t raised prices in a while, it might be time to do so.
While you don’t want a debt overload, a modest business loan, credit line, zero-interest card, or other types of borrowing can help you through temporary cash flow problems. Cash flow loans are one option, but beware of high interest rates and other possible downsides. (Nerdwallet recently compared cash flow loan options.) Other possibilities include accounts-receivable and inventory-based loans. If you’re considering credit, weigh the pros and cons and read the fine print.
Administrative Overload
Maybe you started a landscaping business because you have a green thumb and wanted to make a living in the fresh air. Yet here you are, sitting at a desk, overwhelmed by paperwork, unsent invoices, lost bills, and misplaced client notes.
Without proper organization and support, a small business can become the victim of its own success. One missed customer appointment can cause ill will — damaging your company’s reputation — and an unanswered call can send a potential client to a competitor.
Even if you’re well organized, administrative tasks may be taking too much time away from your core business and sapping your entrepreneurial energy.
What can you do?
Look at your pain points to determine where you need help. Online scheduling software can automate reminders, and a virtual assistant can handle appointments and calls. If billing, payments, collections, and accounting have become stumbling blocks rather than engines that propel your business, consider a bookkeeping service to get your records in shape.
Cyber Insecurity
Anyone with an internet connection faces the risk of a cyberattack. A small business in particular can’t afford to have ransomware hobble its computers or experience a breach that exposes sensitive data to cyber criminals. Besides direct losses, businesses face the possibility of legal action or fines if consumer data is compromised.
Nearly 25 percent of organizations that have experienced a cyberattack have lost business, with 40 percent citing substantial losses.
What can you do?
Create a custom small business cybersecurity plan. Check the Federal Communications Commission’s (FCC) 10 cybersecurity tips for small businesses, which include advice like providing security training to employees, using a firewall to protect your network, backing up important business data, controlling and limiting access to data, and securing wireless networks.
Use the FCC’s list of resources, or take an online cybersecurity training session.
A Poorly Done Website — Or No Website at All
A good website isn’t a luxury. It doesn’t need to cost a fortune, and the lack of a website may cause you to lose business. Eighty-five percent of consumers start the path to a major purchase with online research.
A website can be a potential customer’s first introduction to your company. Consumers use company websites to find or engage with local businesses a majority of the time. Yet nearly half of small businesses didn’t have websites as of 2016.
If you want to make a good impression, inspire trust, tell consumers about your business, and let them know how to contact you, you should have an appealing, easy-to-navigate website.
What can you?
You can hire a professional web designer to build your website for you. To find one, do some research online, like any diligent consumer, or ask for recommendations from other small businesses with appealing websites. Tip: If you like the design of a company’s website, you can check the bottom of the website to see what design service it used.
If cost is a problem, or you want to do it yourself, try a free or low-cost website builder. WordPress, Weebly, and Wix offer well-designed templates and other features that can give your business a polished presence. You may find that the right combination is a do-it-yourself site with assistance from a designer.
Could you use experts to help you reconcile your books, track spending and payments, and manage payroll? BKE specializes in bookkeeping for small businesses. Contact us and we’ll review your books for free.