5 Big Problems of Small Businesses and their Solutions

Every entrepreneur can tell you that starting your own business is not without its perils. The road from being an employee to becoming an employer is not always as easy as you might think; even more, if creating your own business is relatively easy, maintaining it afloat is not. Small businesses can encounter a lot of specific problems. However, none of them is insurmountable as long as you have the right knowledge and allies in your corner. Read on and find out what the top 5 problems of small business owners are and how to solve them.

1. Dependence on a single client

Numerous startups, especially tech ones, begin their journey with a single large client. While this is an excellent strategy to help you start and learn the ropes, it is not so beneficial in the long run. Client dependency equals the uncertainty of being able to pay next month’s bills and wages. Even more, it can lead to the over-specialization of employees which will make it harder to gain new clients in the future.

Our advice: Wait no longer than 6 months to start prospecting the market for new clients. Granted, this may mean you have to add new people to the team without the certainty that they will have a project to work on, but this risk is much smaller than having to close up shop as soon as your one client backs out from the contract.

2. Scalability is hard to manage

Naturally, all small business want to grow and become more powerful, but very few can achieve a sustainable growth. Most managers believe that more clients is the sole requisite of business growth, but the reality is that you need to be able to sustain new clients. This means new employees and new investments made in extra stocks and/or new, larger headquarters. Taking on a new client without the possibility to actually work for him is the beginning of the end for most small businesses that dream big.

Our advice: as always, moderation is key. Ideally, you should expand and start searching for new clients at the same time. Start by making sure that you can easily cater to the needs of you existing clients. Then you may think about hiring new personnel, but do this gradually – no more than one new employee per month, for instance. This way, you can make sure that you have the time to train them properly and that they are ready to deliver excellent results. Also, it is always better to pay your current employees overtime for a while than to hire new ones without being sure that you can keep them.

3. No time for R&R

The risk of burnout is higher among new entrepreneurs than any other category. The reason is very simple: in the very beginning, you want (or need) to do it all on your own. After all, you know what’s best for the company and maybe you don’t have the cash flow for too many employees yet.

Our advice: A hands-on manager is always beneficial for a small business, but exhaustion can prevent you from always making the right choice. Make sure that you can take at least one weekend completely off-work. Besides rest, a bit of distance will also get you some much needed perspective.

4. Unforeseen Expenses

No matter how good you are at budgeting, unforeseen expenses will always appear and put a damp on the smooth running of your business. New taxes, broken equipment and an increase in the prices of your supplier are just a few of the things that can easily catch you by surprise.

Our advice: Always leave a 20% margin when setting your budget. Chalk that up under unforeseen expenses and, if you don’t have to tackle any, you can use them for additional investments.

5. No budget to promotion

This is one of the major problems all small businesses have to face. Properly done marketing is quite expensive and so are the wages of those who are good at any. Thus, you find yourself in an impasse: you can’t grow because you don’t have the money to promote your products or services to new audiences.

Our advice: Plan ahead. Set a marketing budget from the very beginning, even if you are one of those startups who rely heavily on a single client. If necessary, make cuts from other departments, but make sure that you can spend a few pennies on marketing every month, too.

Dire as the above problems may sound to anyone considering entrepreneurship, it is worth to remember that these are challenges, not end points. Another thing that needs to be pointed out is the fact that most of them are money-related. But, if startups had corporations’ cash flows, they wouldn’t be called small businesses anymore. Luckily, they can be fixed by choosing the right investments to make and having someone to back them up.

kabbageKabbage is a small business loan provider, a company that believes in supporting and nurturing great ideas. It is the kind of solution that small business owners can turn to when they feel that their growth needs to stop because of a lack of capital. Most importantly, Kabbage understands that entrepreneurs have very little time to act on a great idea; thus, they offer cash within minutes from applying online, with no paperwork required.

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