When it comes to starting up, growing or running a small business, you’ll find plenty of problems on a daily basis. Some of these issues will be unique to your firm but there will also be problems that blight small businesses and start-up companies all over the world. Making yourself aware of the most common issues that blight entrepreneurs or start-up firms will help you to avoid them or minimise the impact that they have on your life.
Overreliance on the Founders Funding
A report undertaken by Gallup found that the vast majority of start-up businesses are financed by the savings of their founder. The report suggested that 79% of people who have started up their own small business, which equates to firms with 5 or fewer employees, did so having drawn on the finances of the founder.
It is easy to see why using savings can seem like the smarter and safer option compared to obtaining loans or finance but this creates an additional sense of pressure straight from the office. Every new business should be looking to work hard to be a success but when the finances of someone involved with the company are at stake, this can create additional stress and a greater desire to be a success. This is not always a good situation or working environment to be in, and this may impact on the ability of the company to grow and develop.
When people are under pressure, they may take more risks or attempt to obtain money in grander and larger ways. This is often the opposite approach that a business should be taking with respect to their finances so be aware that self-funding isn’t always the most sensible idea.
It can be difficult to Scale-up
While the vast majority of businesses are looking to be a success, success can often take many businesses by surprise. This means that while a firm needs to scale upwards to meet the level of demand for their products, they may find that they don’t have the cash, the means or even the time or ability to product more and meet demand. This can cause a number of problems.
Firms in this situation will often have to make quick decisions and wrong decisions at this stage can stifle and eventually kill a company’s hope of sustaining their growth and development. There is also the fact that many firms cannot meet the demand and this leads to customers turning away from the firm, which in the long run sees a firm losing out on customers and being unable to capitalise on their progress.
It may also be that some firms find the best solution to scale upwards quickly is to accept external funding or take money from related firms in the sector. This can see a firm lose their independence and in the end, a start-up company can find itself consumed by a larger firm in their sector.
The Wrong People are on the Team
One of the most difficult things when starting a business is bringing in the right people. If you are working by yourself and you find yourself under additional pressure, there is a need for you to bring more people in. if you have no experience in hiring people, can you be sure that you are making the right decision. If you turn to family or friends for the role, can you be confident that you are choosing the right people or are you choosing people because you know them?
Having people with no experience, drive or the required skills to move your business forward can be hugely damaging, and this is why it is essential small businesses take time to find the people who are right for the role.
A Lack of Cash
While you may have big plans for the future, you need to have cash to deal with the here and now. One of the biggest concerns that small companies face is a lack of cash to pay bills when they arise and this is why there are times when a helping hand is needed to protect your business. Any small firm that finds itself with a short-term cash flow, but with confidence that money is coming in, should consider obtaining a guarantor loan.
A guarantor loan provides finance at an affordable rate of APR, and this can be used to avert any small cash flow crisis and allows a firm more time to obtain a more sustainable business model.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.