No matter what small business owners live with worries all the time. When one problem is solved there is another challenge ready to address and go ahead. This is the reality of small businesses. Here are few challenges they usually face and tips to address them and go ahead strongly and successfully:
It is the lifeline of a business. If there is no to minimal cash flow the business may be destined to fail. So focus on your sources and uses of funds. Cash inflow generally derives from sales proceeds from customers and loans, and cash outflows to suppliers, employees, and government agencies, for example, to CRA for GST/HST, payroll and business/corporate taxes. Try to collect sales proceeds faster than your cash outflows to various parties. If needed, it is better to maintain a cash budget for each week and month to understand at what time you may require additional loans / financing or when you can pay off existing loans.
Maintaining existing customers while looking for new ones is truly cumbersome. Sometimes, especially during tough time such as bad economy or fierce competition, you may need to lower your price. Existing customers may also ask you for lowering price and hence profit margin goes down. You should analyze customer-wise profitability to see who give you more profit and you can create a portfolio of customers considering profit margin, risk, loyalty, etc. parameters.
Good employees in fact develop better and sustainable business as because the small business owner-manager cannot do everything by him/herself. Good employees come up with new ideas that sometimes cause innovation to ultimately benefit the small business. Employees tend to embrace good work environment and appreciation over bigger paycheck. Existing good employees may grow older to retire and short-served good employees may leave for better opportunity. Small business owners should develop good human resource, value their opinions and engage them in the operations.
For most small businesses overhead is a fixed cost. If you can keep your fixed costs low, the chance of survival of the small business gets higher. The more the overhead such as payroll, fuel, heat, maintenance, insurance, property taxes, etc. increase it puts more pressure on your cash flow and on your family living expenses. Evaluate which costs can be reduced or avoided by adopting more economical approach while maintaining better pay and parks for your employees.
Changes in technology requires quick adaptation in order to stay competitive and strong in the market. For example, if you use a desktop based software that has online edition and your competitors are enjoying more flexibility by using this and be able to provide more value to their customers because of more features that comes error-free and saves a lot of time. This new technology may cost you more, which should be compared with the time you save, value you add to your customers and cater number of additional customers you can serve with the time saved.
Marketing and Advertising
There are enormous channels to reach to customers and social media has changed the marketing process. When there was no other channels than print media, you needed to spend on one channel only. Whereas there are now so many online and print media and customers have access to almost all of them, it is really difficult to assess and determine which channels will generate leads for you and each channel has a cost. Some owners organize seminars as well. For example, you usually put you ad on kijiji, now yellow page, yelp and so forth also have strong online presence and your prospects have access to all of them. It is truly expensive for you to put ad on all channels. So small business owners should analyze their products and services to find out the right target group or niche and spend on marketing and advertising accordingly.
There are many functions in a business such as marketing, sales, manufacturing, warehousing, delivery, ordering, human resource, administration, finance, and accounting. Doing everything by yourself will put in a position where you miss the coordinated efforts required to perform as expected and outperform your competitors. Rather not doing everything by yourself you should find a person who you can delegate less critical and less important tasks to free up some time for you to control overall operations and specifically keeping more focus on cash flows and profitability.
Some small businesses may require reporting to government agencies in prescribed forms and within a timeline on regular basis or when an event occurs. It requires a lot of hours of small business owners. For example, money exchange and transfer business requires regular or ad hoc reporting to FINTRAC on various matters. Unless your business deals with highly personal and complex matters, it is better to get help from third party at a lower cost.
There is a common saying about business that you work to make money not to save money. If small business owners works for long hours to save money, they are truly leaving the opportunity behind which they can reap by delegating the less risky and less important tasks to others. The time they save can be used for developing strategic plans and actually implementing them for success. They can also enjoy their time with family and friends that in turn gives them joy and energy to work in a better way for their businesses.
So small business owners – do plan ahead!
Source: Business Matters April 2017 by CPA Canada
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