Although it may be exciting to become an entrepreneur, it does not come without its own set of challenges. According to the 2016 Small Business Credit Survey, there are a number of challenges that over 60 percent of small businesses face.1 With statistics like more than 50 percent of small businesses failing in the first four years, there is reason to take a second look at whether or not this is a viable decision.2 Here are six of the most common challenges for business startups:
1. Managing Cash Flow
Small businesses cannot survive without cash flow. When starting out, the struggle of keeping up with overhead, invoicing, and other processes can make things very stressful. Waiting on a customer to pay the invoice you sent them can mean paying the light bill or buying groceries. It’s a risk-taking challenge that requires strict budgeting and proper planning.
2. Managing Time
Small business owners wear many, if not all, the hats of the operation. Time is money. If you have to do everything, you aren’t taking the time to get new accounts to make the money it takes to keep the operation going. This often happens with inexperience in being in total control, and inexperience in the line of business.
You’ve decided you need to hire an employee, or even a few that can help you take things to the next level. While you’re figuring things out, this can take up a lot of time. Going through their resumes, setting up and giving interviews, and most of all, deciding on how much to pay them. What about retention? It costs a lot more than most entrepreneurs think to have to fire and then rehire someone else.
Your operation may remain stagnant if you don’t have the capital to get the equipment or services you need to get things in order. Many small business lack the resources to adequate capital for a number of reasons that may include poor credit, no personal capital, or other things. Depending on the age of the entrepreneur, they may be too busy worried about paying off student loans, or don’t have savings they can tap into.
While the internet and social media has made it very easy to start a thriving business, there are still some expenses in the marketing space that require money. Getting a website, paying for the hosting, telephone and cell phone expenses, marketing materials, and other items are all required to have a thriving business that is positioned for longevity.
For many, debt is a very scary word. New entrepreneurs want to avoid as much debt as possible, fearing that the economy may change and they do not have a way to repay loans or credit. This can be overcome by having a strict budget and repayment plan that could help to establish business credit and help the business stand on its own without interference of personal credit.
When going into entrepreneurship, there are a lot of mistakes that may be made, as it is a continuous learning process. Understanding the processes that are needed, and finding clever ways to balance those financial pressures is key.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.