Setting up, establishing and running a small business can be rewarding both spiritually and financially rewarding. The freedom that running a small business can offer cannot be measured. However, it requires dedication and patience to deal with the inevitable challenges which will inevitably confront you.
To rise to the challenges you’ll need resilience, but as you move forward, the challenges become less and you’ll have learned some valuable lessons. However, to save you time and to give you a heads up, here are a few challenges you might come up against and how best you can face them and come out on top.
Managing day-to-day financing
Financing a business on a day to day basis is relatively easy if your business is a grocery store, hardware store or hair and beauty salon. With regular footfall over the threshold, often paying by cash, you will have a daily revenue stream. If you have 30 or 60 day credit accounts with suppliers, you will have a surplus of money in the bank until settlement time. Revenue can be placed in interest earning accounts. You won’t ern much given the sorry state of savings account interest, but a little is better than nothing.
Credit lines for security
However, if you’re planning to run or are currently running a boutique or fashion store, this is an industry where, in the main, inventory has to be paid for upfront. This can put strain on finances, so always have contingency plans if you need a quick cash fix. Credit lines can be negotiated with lenders and only accessed when required. Credit lines act as a safety net and can be used for any purpose, such as ensuring employees are paid or a tax bill deadline is not missed. You never know what is coming, so planning ahead is crucial.
Purchasing capital equipment
For a small business such as a hair salon, the purchase of capital equipment is not such a heavy outlay as would be experienced by business operating in the construction industry. If you’re a contractor working on heavy duty projects such as road maintenance or ground preparation for new builds, you may have to invest in heavy machinery.
Excavators are a prime example of capital outlay in the construction industry. Running to many thousands of dollars, leasing or buying heavy equipment is what construction business loans cater for, among other things. Interest payable on business loans can be offset against tax liability.
Pay suppliers up front
If you can pay suppliers upfront for inventory, do so. Often you can negotiate a discounted rate for cash payment up front, which works out as a big saving. This works well in industries where cash and card sales are regular, such as a grocery store, restaurant or bar and nightclub. It isn’t so much of an advantage if your clients pay on 30 or 60 day accounts, as is typical in construction as outlay can be much higher in this industry.
By taking steps to face the challenges of small business ownership that lie ahead for owners of small businesses, the challenges are less severe and easily dealt with. By facing the challenges with the tools in place to do so, you can come out on top and your business thrive.