By Ben Kinsey
|Image courtesy of Pixabay|
One thing that’s certain about owning a small business is that it’s never boring. Whether your business is a one-man band, a mom & pop shop, or you have graduated to the point where you have a handful of employees to contend with, owning a business is a challenge that many people never attempt. That being said, owning a small business means having to deal with financial ups and downs. While most business owners would rather deal with the issues of a business on its way up rather than on its way down, both of these indicators can lead to disaster if you don’t heed the warning signs.
1. Is your business booming or busting? – Having a booming business sounds like a good thing, doesn’t it? Yet many small businesses hit the rocks if they aren’t prepared for growth. This is the case regardless of whether you sell products or vend a service. If you haven’t planned for growth, a sudden spurt of sales can lead to disaster if you are ill equipped to deal with lots of new customers. What would you do if your suppliers are unable to keep up with your demand or your staff was stretched too thin to be able to successfully deal with an influx of new clients? Far from having a small delivery issue, this scenario can lead to bad blood, bad reviews and a black eye from which your business would be hard pressed to bounce back. This kind of issue usually occurs to business owners who are still running their firm by the seat of their pants, as opposed to more seasoned entrepreneurs who plan ahead.
|Image courtesy flickr|
3. Is cash getting tight? – One of the biggest hurdles for growing businesses is being able to deal with a cash crunch. Whether this occurs as a result of payroll problems or supply side issues, coming up short cash-wise is a fairly common occurrence with small businesses. That’s because many small businesses work on a cash basis, which is the first mistake. The second is not courting lenders early on so your business can acquire the credit you may need to sustain and grow a business through the inevitable ups and downs of the marketplace. Before you find your business struggling financially, it would behoove you to talk to your accountant. A CPA can easily help you devise a sound financial plan, as well as creating checks and balances that will let you know well in advance whether the marketplace is heading up or down. Your accountant can also help position your business for a line of credit by providing lenders with the financial records they need to approve a small business loan. Don’t make the mistake of riding a wave of short-lived financial success only to have your business wind up in financial difficulties during a market downturn that you are ill-equipped to deal with.
|Image courtesy of flickr|
4. Are you having trouble hiring and/or keeping capable employees? – Another danger sign to any small business owner is having trouble finding and retaining good help. Just as with financial planning, it isn’t at all unusual for business owners to wing it when they seek to hire. As a result, they find themselves overwhelmed by applicants who are poorly qualified. This can many times result in high employee turnover, either by being forced to fire under-performing employees, or having capable staff members wooed away by competing firms. If high turnover is making you toss and turn in bed every night, it’s time to formalize your hiring practices by creating a written HR system that helps you better prequalify, interview and train employees. While it may take you a few weeks to analyze and document what you expect of new hires, the time it saves you down the road will be more than worth it. If you want some suggestions, check out my previously published blogs, It's Not Hard to Find Good Help and The Terrors of Employee Turnover.
5. Are your clients driving you crazy? – Another conundrum that many small business owners encounter is dealing with D-clients. These are the clients who suck up way more time than they are worth. Plus, they are never happy, no matter how conscientious you and your staff happen to be. In short, they can disrupt your business while making you and your employees extremely unhappy. While there could come a time when you need to cut these black holes for time loose, the secret to avoiding D-clients is to stop working with anyone and everyone who can afford you. Start screening potential clients the same way you screen potential employees. While this may cause you to walk away from some deals, if you don’t learn to weed out the deadwood, all that will happen is you will slowly sap the positive energy that can help you build a successful business.
Ben Kinsey, CPA of Small Business Group works with owners of closely held corporations in the Northeast Florida region. If you work in the North Florida area we offer a FREE initial Consultation at our office, please contact Small Business Group if you would like to know more about strategies for your business.