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5 Problems Small Businesses Face and How to Overcome Them

If you think it won’t take much for a small business to stay afloat, you are mistaken. It’s true that the majority of companies with no more than 500 employees can get through the first year with no problem, but according to the U.S. Chamber of Commerce, only 70% remain operational by the end of the second year. Then by the fifth year, only half of the companies are still in business.

There are a lot of things that can get in the way of a business’s success. There are hurdles that business owners will encounter, and knowing what they are can help you prepare for them. To help you out, New Business Centre shares some of the most common challenges that small businesses need to overcome in order to succeed:

 1. Limited Cash Flow

Many businesses have trouble managing their cash flow. They do not realize that making minor tweaks like invoicing correctly can get you enough money to cover the monthly utilities. If you implement strategies to ensure that you are paid on time, you can build more cash that you can use to invest in your expansion.

 2. Not Using or Sticking to a Budget

You can’t always just spend money and keep your fingers crossed in hopes that you’ll have enough by the end of the month for all your expenses. You need to set a budget and make sure you stick to it. This will help you plan for the business’ future better and serve as practice for when you have to analyze expenditures or make quick changes.

 3. Not Preparing for Unforeseen Expenses

Expenses that you have not anticipated can derail your business plans. Just like how you would prepare for an emergency in life by setting aside money, you should do the same for your business. Have a separate account for your rainy day fund. The hope is that you’ll never have to use this fund, but if you do end up needing money for an unanticipated expense, you won’t worry because you know you have a cash reserve for it.

4. Not Complying with Taxes

Cash management is hard enough, so you shouldn’t make things even more complicated by overpaying your taxes. Every year, up to 85% of small businesses still overpay the IRS. Other companies underpay, which is also wrong as this will definitely get IRS’ attention on you.

Overpaying and underpaying both can result in problems. You’ll have to invest time, money, and effort to sort problems with the IRS. The biggest issue would be compliance. So, you have to make sure that you comply with everything set by the government for businesses.

5. Not Paying Your Bills of Time

 Just like how you would want your customers or clients to pay you on time, your landlord, suppliers, and all the utilities you are using have to get paid promptly, too. While it’s inevitable that you’ll pay late occasionally, you shouldn’t make this a regular thing because it can cost you. You can hurt your relationship with your suppliers. They could refuse your business in the future. Your utilities could be cut off, and you might have to pay interest for your late payments, too. 

Conclusion 

These are some of the challenges that entrepreneurs must overcome to achieve business success. Running a business can indeed be overwhelming, but taking note of what could get in your way and having a plan of how to deal with those can significantly increase your chances of succeeding.

 While there’s no single rule on how to make a business successful, New Business Centre can help you navigate the complicated world of small businesses. We can provide you with a better understanding of how things like operations, marketing, and sales work so you can make informed decisions. Contact us to know how we can help you!