Establishing a business is often easier than maintaining it. There are later challenges that every business faces regardless of size. But there are issues unique to small businesses which big organizations have long grown out of. To stay afloat, young businesses have to weather some storms in the right way. It’s often difficult to keep a new business alive in the face of different difficulties. The US bureau of Labor Statistics revealed that 20% of businesses don’t make it in their first year; 50% fail by the end of their fifth year; and ten years in, about 80% go under. The story is also similar in the UK, as business deaths continue to soar in almost identical proportions to births. Here are the unique challenges that tend to drag most small businesses to failure.
Lack of Client diversity
If a business heavily relies on a single big client, then it can quickly grind to a halt when the client withdraws patronage. Your are more or less an independent contractor than an actual business if one customer’s account makes up more than half of your revenue. The solution to this issue is to diversify your client base rather depend on one or two clients.
Customers come and go, and businesses should be able to survive when clients leave. This means you have to put marketing efforts in place to generate and convert new leads on a regular basis and keep your sales pipeline fresh.
Cash flow management
Financial issues are burdens that overwhelm most businesses. And for small businesses, the problems include clients delaying payments, outstanding bills that urgently need to be paid, and unexpected outgoings. Not having enough revenue that can weather bill payments will serve as a drain on your capital. And to avert this, strengthening your cash reserves and shoring up capital seems to be the right move. That is why most entrepreneurs often go for multiple income streams to support their businesses. But if your business can’t survive financially on its own, then it is looking at a possible end.
One way to solve this issue is to have a handle on your finances. Adapt more holistic cash flow management strategies. Employ professional bookkeepers that can track and manage your cash flow as your client base and employee pool increases.
Preparedness for uncertainties
Most entrepreneurs go into business without a backup plan. Let’s face it, disaster can happen and you’ll be left with no survival option if you haven’t put a contingency plan like insurance in place. Even small businesses such as shops and retail outlets require a backup plan to help them stay afloat after disasters happen.
Fatigue and owner dependence
Small businesses often run on inadequate employees, sometimes only the owner bears all the brunt work. This often leads to burn out and fatigue which can leave you and your few employees disoriented and disorganized which will go on to affect your bottom lines.
Also, if your business heavily depends on your presence for certain not-so-heavy tasks to be handled, you are facing a deadline. You should spread out your tasks and outsource most jobs that you can afford to, in order to ensure your business runs smoothly.
Starting a business is an important milestone, but keeping it alive is the true measurement of your success. Issues and challenges are definitely going to raise their heads, it’s how you tackle them that matters.