One of the reasons so many small businesses fails the first year of operation is because their owners don’t know what it takes to make their business run and grow. Their notion is that their work ethic alone will bring them money, freedom and control of their business. They fail to understand that financial factors mentioned below are not worth paying attention to if their business is single-handedly run. They are wrong!
- Not Creating A Financial Blueprint
Financial blueprint, just like a business plan, is where all the finances related to the business is put together. This includes business startup cost, cost of procuring materials, equipment, place and personnel and transportation among many other things. A financial blueprint will describe the source of fund, such as banks, credit unions or other financial institutions, who your investors are and how much of the personal asset will you set aside for the business. Not having this blueprint is equivalent to showing to the lenders that your business is a bad risk.
- Not Investing In Technology
It used to be such that all a business would need is a telephone and fax machine. Not anymore. Today, every business irrespective of its size and mode of operation needs a computer and access to the internet, a full-pledged website where customers and clients can interact with the business, software to manage accounting and other mandatory operations and other technology related elements. There is a need to manage the information accumulated and make the best use of the collected customer data as well. Not investing in technology can set you back and cost valuable clients, information and all the good things the modern world offers.
- Non-utilized Fund
The goal of your business is to make a profit and grow at the same time. It is also to build a long-term relationship with your clients and create excellent customer satisfaction. When you are short on the fund, your lenders will help you get through. However, you can always utilize fund from your business account and reduce your interest and borrow only if absolutely necessary.
- Unprotected Business
You will need to protect your business as well as employees for which you need adequate insurance coverage. To be precise, property insurance, liability insurance, workers compensation insurance, assets and errors insurance and omissions insurance are some of the required insurance types. Without them, your business will suffer financially. In essence, keeping the coverage up-to-date will make the difference between closing the business permanently and running it with a minimum possible loss.
- Neglecting Compliance
Neglecting such significant issue like compliance can put companies at risk which can harm their reputation as well as the brand. The company should avoid such consequences or should take immediate actions to avoid further damage. Similarly, to avoid decreasing customer base, the companies could outsource to handle the operations such as legal fee financing, & helps to run the transactions smoothly.
- No End Goal In Sight
Financial setback can occur when you are not sure where your business is headed and what you can expect in two years, three years or five years down the road. You started with a vision with the intention of making it a reality. The hard part is, only goal-oriented businesses survive and grow in a competitive world like this. You need to put in place the goal-setting system to make the business successful. You will also need to gather the team that will help your business grow. This vision or goal needs to be created, first inside your own mind and then put into action with preparation and planning. If you are leading the business this way, you will find that creating that goal and achieving in the outside world is easier than dreaming.
- Unorganized Worksite
Good business owners are organized, punctual detail oriented and neat. They will not end their day without a balanced financial statement. In other words, not being organized will lead to huge financial loss. You would probably end up with the wrong information about how many sales were made and how much money was earned or lost. If someone is organized, it means they are using the needed software or balance book to the fullest. It also means they have the knowledge, skills and are financially responsible that will help the business succeed.
- Stubborn Attitude
Change is something every business faces, and adapting to that change is a prerequisite to run a business, not an option. Simply managing the business to stay alive is not adapting to changes. Certainly being adaptable means money well spent or saved for the future. The only way to do this is to check the progress frequently and consistently and make sure the goals are closer. Running a business is about making an honest assessment of what aspects are working and what are not working and changing accordingly.