4 big financial challenges for SMBs

By David Webb

Starting a business nowadays is relatively simple, but running a business and ensuring its success over the long haul is a different story. Finances are one of the most important aspects of running a successful business. Not only that, but financial mistakes are the most dangerous to make, especially since even a single mistake can ruin your entire business.

Many businesses, such as startup companies and small businesses that are new to the market, have financial issues. The main reason is that you require a lot of funding to establish a good presence on the market, while you’re still unable to make significant profits and cover all the expenses. That’s why it’s important to plan your finances well and make strategic decisions that will turn your investments into profit. Here are a few of the biggest financial challenges for SMBs.

Poor decision making

Running a successful small business depends on making the right call at the right time. Many opportunities will present themselves, and it is up to business owners to capitalize on such prospects. However, many business owners choose to neglect research and important data collection in order to cut costs. Researching the market requires investment for it to yield valuable data you can use to develop your business further.

[amazon_link asins=’B00ATLM02Q’ template=’ProductAd’ store=’succeedingi0d-20′ marketplace=’US’ link_id=’5cb3edb9-8447-11e8-8cf7-19d387e405f4′]Instead, owners choose to make their own decisions based on the knowledge they posses or their gut feeling. It’s important to understand that you’re more likely to make a crucial financial mistake if your decisions aren’t backed with hard evidence and foolproof data. And, as mentioned before, even a simple financial mistake can prove to be disastrous for your business. Make sure you invest time and money into proper research. That way, you will lower the risk of losing funds when making important business decisions.

Money management issues

Many small business owners struggles with money management. That’s why so many small companies have difficulties in establishing and maintaining a positive cash flow. Cash flow management is the most important financial aspect for every business. The main reason is that cash allows you to cover expenses and cut loses that may lead to even greater financial problems. Without enough cash on hand, you won’t be able to cover any expected or unexpected costs, even if your company is generating good revenue.

[amazon_link asins=’B00KNC2C4C’ template=’ProductAd’ store=’succeedingi0d-20′ marketplace=’US’ link_id=’6c90bf18-8447-11e8-ac4f-5394eb090872′]Simply put, your profits won’t do you much good before they’re turned into cash on-hand. In such cases, you’ll have to look for outside investment to cover your expenses. Applying for a loan at a bank may be a good idea to gain quick cash, but, if you have a bad credit score, you might get denied or you may get charged extra high interest rates. In that case, reliable bad credit loans may be a more suitable option for you, as they are more flexible towards owners with a bad credit history.

Lack of growth capital

In the business world, sudden expansion and growth can be a major financial challenge for many small businesses. The main reason is that you’ll need proper funds to meet a new market demand and scale your business accordingly. Many businesses fail at this because they lack proper growth capital. When faced with rapid business expansion, many owners choose to reduce product quality or cut costs some other way in order to meet production demands because they lack the funds to scale their business.

This, however, can have major negative implications on your business. Your customers will be displeased with the lack of quality and you’ll experience bad word-of-mouth and perhaps even bad publicity. That’s why it’s important to secure growth capital for your business.

Avoiding a financial analysis

To manage your business finances and have better chances of overcoming financial challenges, you mustn’t avoid developing a financial statement for your company. A financial analysis helps you determine your company’s financial standpoint, as well as your company’s liquidity. You have to understand where the money in your business is coming from and where it’s going. That way, you’ll know how much working capital you have available and which business aspect requires improvement.

[amazon_link asins=’073521414X’ template=’ProductAd’ store=’succeedingi0d-20′ marketplace=’US’ link_id=’7636aff1-8447-11e8-a706-77fd40993c83′]For example, you must analyze your current assets and liabilities to determine profits and losses. Also, cash flow analysis and balance sheets help you determine your equity, as well as make financial predictions for your business. Without a thorough financial analysis, you have no way of understanding how your company operates from a financial standpoint. That means you’ll more likely to make bad decisions or make investments that won’t yield any profit.

Financial challenges are one of the most difficult obstacles many small businesses face. Running a business and turning it into a successful enterprise requires good funding above all else. If you fail to manage your funds or plan out finances for your business, you’ll have no chances of ever achieving business success. That’s why it’s important to understand the challenges you face and prepare accordingly to overcome them.


David Webb is a Sydney-based business consultant, online marketing analyst and a writer. With six years of experience and a degree in business management, he continuously informs the public about the latest trends in the industry. He is a senior editor at BizzmarkBlog. You can reach him on Twitter or Facebook.

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