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7 Challenges Most Start-Up Businesses Encounter in 2021

Start-Up Businesses Encounter in 2021

A start-up business can provide many benefits. First, it’s gratifying to do something you love. Second, having customers buy the product or service you developed is an outstanding achievement. Finally, it is also exciting to grow a company and provide jobs for others.

But running a business on your own isn’t always easy. When you are your own boss, you do not have the safety net of your employer. It can be difficult and frustrating. Knowing what obstacles you may face will help you and your business prepare to deal with them.

Here are some of the usual problems start-up businesses face.

Insufficient Cash Flow

Cash flow management is a constant struggle for most business owners. Small business owners identified lack of cash flow as their greatest challenge 33% of the time.

It’s an ongoing struggle no matter the time of year. Business owners need to understand that it does not matter how many assets they have.

A business cannot exist without cash.

Regular and recurring expenses like payroll and rent can hurt your cash flow. But, to maintain operations, you must buy supplies and fulfil orders.

You can improve your cash flow by experimenting with your payment processes. Extending your payments is an excellent way to increase your cash flow.

You should try to stretch out your cash payments without being late. Also, you can shorten the time it takes to get paid for your invoices.

Rather than making clients pay you in 30 days, you should consider cutting the deadline to 15 days.

Make sure to let your clients and customers know about the change before the next payment cycle so they won’t be surprised or caught off-guard.

Staying Within Your Budget

Budgeting is another common challenge in business. Budgets are crucial To run a clean operation. Making regular comparisons between actual results and projections can help you keep an eye on expenses. Budgeting can also help you make timely corrections when needed.

The goal is to create a budget for your business that is realistic and aligned with its objectives. There are several useful free budget templates available online. Looking for one will make a budget easy to understand.

When creating a budget, first, you should identify sources of income. Determine your available funds. You should include accounts receivable, investment earnings, and sales figures. The next step is to add up all fixed expenses, such as rent, equipment leases, or loan payments.

The aim is to create a realistic and aligned budget for your business.

Make a list of the expenses that fluctuate each month, such as:

  • Office supplies and needs
  • Marketing
  • Gas and travel
  • Wages

The last thing you need is enough funding to cover emergencies and big one-time purchases. These purchases can be accounting software or necessary equipment.

Set up a monthly budget review after you have created quarterly and annual budgets. Let’s say you have a $50,000 goal for the month, but by the 20th, you are only at $20,000. The last ten days of the month are a great time to motivate your sales team to close the gap.

Budgets create accountability when they are built and reviewed regularly. You can also make more informed financial decisions when you have a budget.

Developing Marketing Strategies

Marketing and advertising rank as one of the top challenges faced by small business owners. These three online advertising platforms (Google, Facebook, and Instagram) have become increasingly competitive.

Small companies have a more challenging time competing with larger companies. However, these more prominent companies can run CPC campaigns on a huge marketing budget.

As a result, some small businesses are left behind.

29% of business owners do not use digital marketing. In addition, 22% say finding the time and resources to market remains a challenge.

If you want to be competitive without draining your reserves, then you need to be creative. For example, try developing value-added SEO content instead of just advertising.

Creating related blogs and videos in your field that talk about related topics works well. As a result, your search ranking can be improved. In addition, more potential customers searching for similar products and services can find you.

Debt Overload

A lot of entrepreneurs can claim that they were successful on their own resources. So it isn’t uncommon for new businesses to borrow money to launch. There is, however, a limit to how much business debt a company can take on.

Perhaps they spent too much on a credit card, or the bank extended a line of credit that they’ve now exhausted. A high-interest rate is tying them up.

Regardless of the type of debt used, such scenarios can have significant short and long-term impacts for a company.

For example, positive cash flow may take time to develop. In addition, your business must pay overhead, employees, and suppliers to continue operation.

The following steps can help you minimise your business debt levels and regain control of your finances:

Look For Ways to Reduce Costs

Selling excess equipment might be a good idea. However, it may be necessary to decrease your workforce to keep your business alive, even though it is not ideal.

Consider Alternative Financing Options

There are ways to raise cash without significant interest rates and payments. Additional funding can be business grants, crowdfunding or angel investors. Explore different options that can help you ease your debt.

Let Your Creditors Know What You Are Going Through

When you act early on in debt management, it is easier to resolve a problem than to ignore it. For example, to minimise your debt, request that your lenders to:

  • Lower your interest rates
  • Increase your credit line
  • Restructure the way you repay

Combine Your Business Loans Into a Single Payment

If you merge your loans, you may be able to lower your monthly costs without negatively affecting your credit score.

In addition, it may be more helpful to merge your debts. A single creditor instead of many can lower the interest rates.

Poor Tax Compliance

Money management is already complicated enough. Even so, up to 85% of small businesses overpay their income taxes every year. Some underpay and end up facing IRAS or other authorities. Each situation is time-consuming, costly, and challenging to resolve.

Tax compliance costs are one of the biggest challenges businesses face. As a result, small businesses have a more challenging time compared to larger firms.

A tax professional can provide valuable advice.

Startups face an uphill battle when collecting, filing, and reporting sales and using taxes accurately.

Making assumptions about sales taxes or ignoring them will only lead to problems in the long run.

Ask your accountants for advice and your management team for guidance.

Mixing Personal and Business Finances

Small business owners often ignore the importance of keeping personal and business finances separate.

For example, a small number of small businesses don’t have individual business banking accounts. In addition, 23% of companies say mixing business and personal finances is a challenge.

Integrating personal and business funds is risky. It makes cash flow challenging to track and could erode the value of a business. An auditor from the government or internally would see this as a red flag.

Set up a business account to handle all the company’s inflows and outflows, including your salary. Your salary should be a consistent amount at the end of each month rather than just a big cheque.

A business credit card from your bank may also be available to manage your cash flow as you run your business, rather than using your personal credit card. You will then have easy access to all business-related transactions and attachments.

Spending on Emergencies

Unexpected expenses can seriously hurt your cash flow, causing your forecasts to fall apart. Tax bills are occasionally the source of these surprises. In some cases, expensive pieces of equipment malfunction or accidents cost a lot of money to fix.

Careful planning and budget forecasting can help you prepare for some of these surprises. There may be some surprises, however. Make sure you are adequately insured and have a cash buffer for emergencies to minimise your risk. If you get into a financial crisis for your business you can get a business loan from a licensed cash mart lender like the toa payoh money lender.

Written by Mia

Hey Everyone! This is Mia Shannon from Taxes. I'm 28 years old a professional blogger and writer. I've been blogging and writing for 10 years. Here I talk about various topics such as Fashion, Beauty, Health & Fitness, Lifestyle, and Home Hacks, etc. Read my latest stories.

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