Small Business ownership is the most challenging lifestyle there is. Unfortunately, many people start their business without realizing that “the monsters under the bed” are, unlike in our childhood, all too real.
Listed here are three of the larger “monsters” that need to be addressed in order to keep them at bay thus allowing you to get a good night’s sleep:
- Cash Flow: To a small business owner, cash is indeed king. You cannot pay your bills with good intentions. All too often, people do not understand or appreciate the cyclical nature of their business…there are times when people will not be purchasing their products. A savvy business owner will know how to deal with this and aggressively manage both receivables and payables and ensure that there is sufficient cash on hand to pay the bills. Structuring your financial requirements is critical…learn to balance long-term and short-term borrowing and understand their costs. Some symptoms that indicate this monster is on the loose include:
- Under pricing your products, using volume to overcome poor profit margins
- Over-extending credit or giving too much credit to your customers
- Not understanding the difference between sales and profits
- Failure to have realistic sales projections, be ignorant of industry standards
- Spending too much on inventory, equipment and overhead expenses
- Lack of proper financial controls and management procedures
- Not having an accountant on your management team who can tell you what the numbers are really saying
- Legal: Where do I start here…choosing the right legal structure; ensuring all the requisite paperwork is filed with the appropriate entities; avoiding the misclassification of employees as subcontractors; understanding contracts and terms; Some indications that this monsters is lurking about:
- Running your business as a sole proprietorship
- Not keeping up with annual filings and other requirements which keep you in “good standing” with the State Corporation Commission
- Lack of knowledge of tax laws and local regulations
- Not having the correct insurance policies for your company
- Having neither an attorney nor an insurance agent on your management team
- Sales and Marketing: Whilst at face value, this appears to be the easiest monster to overcome, looks can be deceiving. In mythological times, this was know as the Hydra…cut off one head and two take its place. Indicators that this monster is ready to strike, and with a vengeance include:
- Not understanding the dynamics of the arena in which you are competing (B2G, B2B or B2C)
- Not understanding or underestimating your competition
- Mistakenly believing that: “…everyone will buy my product…”
- Not taking care of your existing customers and exclusively concentrating on bringing in “new” customers
- Spending too much money on the wrong type(s) of advertising…using the current “fad” marketing program to boost sales.
While taming these “monsters” may, at first glance appear to be an insurmountable task, they will, with the proper application of effort, knowledge and assistance, be minimized thus ensuring your beauty sleep will be relatively interrupted.
Develop the plan, use the available tools and seek assistance from the service providers listed above as well as SCORE and the SBDC.