Top financial challenges facing today’s small business startups
It has always been difficult for small businesses to compete in a world of corporate giants, but that doesn’t mean they can’t overcome the obstacles in their path. The biggest obstacles are usually financial challenges but once they can be identified, it’s only a matter of finding the right solutions. Let’s look at a few of the financial challenges small business startups are faced with so that they can be overcome.
Many times, startups don’t take the time to find cost effective services or products. There are certain things they know they must have and, in an effort to get up and running quickly, they don’t do the required research and comparison pricing to get the lowest price possible. Bear in mind that profitability depends on the cost versus profit formula and if costs are inordinately high, it is difficult to keep expenditures low.
Take for example that credit card processor which is necessary for accepting and processing payments. Most charge fees that can quickly deplete profits from sales. Did you know that you can contract a credit card processor with fees lower than the going norm and that many come with a dashboard that will help you track many of your financial records? Take the time to look at any and all products and services you pay for because there may be less expensive options out there. Lower your costs and profits should rise.
Insufficient cash flow
It goes without saying that it is usually difficult for startups to build a customer base strong enough to keep sufficient cash flowing. However, many startups aren’t really aware of the reasons they are having problems growing a customer base. A big part of that is marketing. As the old saying goes, you need to spend money to make money and marketing is one of those needs you can’t ignore. How can you bring in customers if they don’t know your small business exists?
Secondly, you may not be doing an analysis of the sales you are losing. Unless you can determine why customers are leaving without buying, you’ll never know how to close a sale. If sales are low, cash flow will be as well. A quick tip here is, have you looked at shopping cart abandonment? Whether in store or online, if it is too difficult to navigate the payment system, customers may leave in frustration. Check out the credit card processor you are using to see if that could be the real issue.
The bottom line
In the end, it’s all about being able to stay afloat until you are standing on solid ground. That will take customer acquisition and retention. Marketing is a big part of why you may not be successful in this area, but so too could an inability to close sales be an issue. If you have any hopes of surviving those first couple of years, make sure you keep expenses to a minimum while finding ways to increase profits through building a strong customer base. If you can do that, your small business startup will have a fighting chance.