Starting a business can be exciting, but it’s about more than registering an LLC. Even if you have a great idea, small businesses have it hard in today’s economy, and you have to be ready to face everything that will be coming your way. Being prepared is essential and knowing the challenges you are likely to have to deal with will increase your chance of success. Let’s take a look at 4 of the biggest challenges of starting a small business.
This is probably one of the issues most if not all startups have to face at some point. SMB funding can be tough to come by when you’re getting started, and that’s why you need to look at all your options. You need to look if you have anything of value that could serve as collateral. Even a vehicle or some equipment you may have could work as collateral. Think twice about gambling with home equity, however.
Also, you should know what it takes to increase your credit. To build your business credit, the most important thing is to get your documentation in order and open a file with Experian, Equifax, and D&B. You will need to get a DUNS number as well. You then want to open as many accounts as you can with suppliers and lenders who will report activity to these bureaus. This is the most efficient way to build your credit, in the condition that you take care of these accounts, of course.
This is probably the most tragic of failures in business. Too many become victims of their success and start overexpanding. They invest in a second location that ends up affecting the operation of the first one and encroaching on cash reserves. They may not have the organizational structure to deal with both or can’t seem to find good managers. Or they accept big orders without being able to deliver.
This is something only an expert will be able to help with, so you have to make sure that you speak with a consultant and don’t get tempted by your first big order if you can’t come through.
3. Money Management
Unless you have experience with accounting, think twice about doing it yourself. This goes for payroll as well. Mismanagement of funds is one of the biggest problems new businesses face. Working with a professional could allow you to see leaks in your finances. They might be able to help you make better decisions. They might also point you to tax benefits you may not have been aware of. Or they might help you deal with excess inventory issues.
4. Founder Dependence
This is an issue a lot of owners don’t think about until something happens. But, if you can’t attend your business for some reason, what will happen? Do you have a succession plan in place? And if you don’t, does your business come at a standstill? This is where you might need to look at insurance.
These are some of the most common challenges small business owners have to face. It pays to be patient and have a plan before you jump in, so make sure you get as much advice as you can and come in informed.