threats

When you are just starting to venture out as a business, whether as a brand-new start-up or within the first few years of your lifespan, there are some warning signs which you should never take lightly. The idea of being your own boss for many entrepreneurs is the dream, but unless you pot the problems early, these risks can continue to threaten you for years to come.

So what are the common problems small business consistently face and what possible solutions are available when in times of need?

Cash flow and funding issues

Perhaps the most obvious issues facing new businesses. Simply put, when the money dries up, there’s not always much you can do. Small businesses need the cash to both start-up and to keep their operations going, sometimes breaking even is all that you can do.

Whether you’ve chosen a supplier that’s out of your budget, or you realise that you’re paying too much on rents, it’s essential to have a solid cash flow plan, and an idea of how your money is going to be spent for up to five years. Once you see that you’re unable to cover typical outgoing costs, you will find yourself in big trouble

Constantly refinancing

Refinancing and seeking additional sources of finance isn’t necessarily a sign that everything is going badly. However, if you always find yourself in negative credit and always needing more just to get by, you can find yourself getting further and further behind. Not only can it be bad for your credit rating and lead to higher rates, it could also be a sign of bigger problems financially.

Using refinance to get yourself out of one or two months can be a great solution to cash flow troubles. Invoice finance, bridging loans and commercial finance are there to help, but if overused and taken advantage of as well as not qualifying for these kinds of loans, you could end up heavily in debt seeing the bailiffs pay your business a visit.

Relying on the same old business

Relying on the same clients, again and again, will keep you ticking over, it’s not a long-term means of success. Businesses in an unhealthy position may be reliant on one or two contracts every month and if those decide they want to part ways, then you’re in serious trouble.

If you spot that your business is slowly losing custom, not finding many new clients and is always relying on the same old business, again and again, it will have a detrimental effect to the business’s future. If you see the business struggling, the worst thing you can do is bury your head in the sane, pretend it’s all ok and continue trading, this could see you trading whilst insolvent, or even see you trad fraudulently.

Issues with marketing

Marketing is perhaps one of the most difficult departments to nail when it comes to running a business. Even many experienced marketers can still get things wrong. New businesses may tend to stay away from it, or go into without much experience, which can sometimes make things worse. In a time when the internet is such a vital tool and imperative to the way businesses run, if you want your business to succeed, having a knowledgeable and experienced marketing department could pay dividends.

Failure to plan for the future

A business plan is arguably the most important thing to start with when you set up a strategy for where you’re going and what you want to do. A plan should not just be a guideline on how you make money, it should be used efficiently, outlining a year on year plan. It should start with a cash flow forecast showing where your money is coming in from and where it is being spent.

If there is room for expansion your plan should show where the additional finance is coming from and how it is intended to be used, not to mention an idea of where extra staff could be coming from. If appropriately used a business plan is an excellent guide for growth, providing you with achievable goals that you can work towards.

 It doesn’t matter how big or small your business is, no one is immune from financial pressure. Although these signs don’t always necessarily mean the end of a business, it can spell troubling times ahead.