Business

The Top 10 Challenges Small Business Owners Face

Small businesses encounter a lot of challenges in their day-to-day operations. Recent research conducted by the  National Federation of Independent Businesses has shed some light on what these challenges are and how businesses are attempting to overcome them.

Since 1975, the NFIB’s Index of Small Business Optimism has proven to be a helpful resource. On a monthly basis, they’ve conducted studies on everything from job opportunities to labor markets, capital investment budgets, and the cost of inflation. The following are the most pressing issues identified in a recent study.

The Most Difficult Obstacles for Small Business Owners

Whether you’re thinking about establishing a small business or are already up and running, here are some typical issues we’ve all encountered.

1. Medical Care

Managing employee health care is, without a doubt, one of the most difficult elements of running a small business. Without a question, your employees’ health is crucial, yet rising healthcare expenses make budgeting challenging. While “Obamacare” is definitely helpful to workers’ health, it is typically company owners who suffer the financial consequences.

2. Government Rules and Regulations

Every year, it appears that the government tightens the noose around the owners’ necks. One of the rules pertains to the environment. The Clean Air Act of 1990 requires you to remove air pollutants, including smog, gas, and other substances that deplete the ozone layer, from your company vehicles. While this isn’t a negative thing, it does present challenges for company owners who lack the necessary vehicles or environmental knowledge.

Advertising restrictions are another set of rules that might stifle your business. In this case, the problem arises when the copywriter takes too much artistic license… and includes deceptive statements in the copy.  These rules apply to both online and print advertising, according to the Federal Trade Commission. When marketing and advertising your business, the best policy is to be truthful.  Not just to save your own skin, but also to deliver the service your clients anticipate; if they discover that your company is “the genuine deal,” as your commercials promised, you’ll see a significant boost in the number of repeat customers.

3. Income Taxes in the United States

Income taxes in the US are increasing at an exponential rate year on year. Corporations are now required to pay 15% on the first $50,000 of taxable income. Expect a 25% tax rate on the following $25,000 in earnings, and a staggering 35% tax rate on earnings beyond $10 million. If that isn’t a challenge, what is?

4. The Economic Situation

Even the so-called “masters of the universe,” Wall Street stockbrokers, don’t have a crystal ball for how the economy will evolve. An SBA 504 loan might help you purchase commercial real estate or significant equipment. By decreasing your overall financing expenditures and allowing you to take advantage of reduced tax rates, the SBA 504 loan protects you from rising interest rates. The volatility of the economy cannot be overstated, and it must be managed with utmost prudence to avoid taking unnecessary risks.

5. Tax Observance

Home office deductions are critical for maintaining earnings when your small business is run from your home. If you don’t love bookkeeping, though,  record keeping can be a real challenge (we’ve all been there).

If your company’s sales are less than $5 million, you can use cash accounting. This contrasts sharply with the traditional (and time-consuming) accrual approach. According to the National Federation of Independent Businesses, when you invest in your firm, you can deduct the cost right away under Section 179. As a consequence, you may be able to reinvest cash back into your company.

6. Managing Cash Flow

This difficulty may be solved by using online billing software, better budgeting methods, and effective cash flow management. Almost every small company owner faces cash flow issues at some point. One basic idea is to maintain meticulous records of your money, including where it comes from and where it goes.

7. Maintaining Your Enthusiasm

It’s more important than ever to be passionate about what you’re doing in the everyday grind of life. Otherwise, the standard of your services or products may degrade, offering your consumers a substandard experience that will lead them to look elsewhere. That’s why passion is so important; working 14-hour days isn’t nearly as difficult when you believe in what you to. You’ll be more inclined to let your small business fail if you don’t truly care about it. Work becomes another meaningless weight around your neck if you don’t have an obsession. If you’re still considering establishing a business, be sure the product or service you’re offering is something you’re enthusiastic about.

8. Failure to Diversify Client Bases

Check over your client list very carefully. If single clients account for more than 50% of your revenue, it’s time to either attract new clients or improve your present client relationships.. When your revenue is based on a single “golden nugget,” you’re going to be in big trouble if you happen to lose that nugget.  Having a reliance on a small number of customers is a formula for disaster.

9. Quality vs. Growth

Over time, a company’s growth may exceed expectations. Small business owners who have not planned for an increase in clientele and product/service output are likely to fail. If you don’t have the necessary processes in place, you’re more likely to fall short of satisfying your company’s demands as it grows. This is why it’s so important for you to continue to build your company while preserving the qualities that made you so successful in the first place.

10. Recruiting New Employees

Many small firms around the country are experiencing challenges finding employees. Unfortunately, the expense of recruiting additional staff (equipment, perks, taxes, incentives, and so on) continues to rise. All of these obstacles must be overcome before determining the wage for the position.

A small firm cannot succeed if it does not have staff (with the rare exception of home-run businesses). If you can, having a few workers under your belt will make your life a lot simpler. It’s usually a good idea to weigh profit against expense.

As a small company owner, you should always remember the following:  your rivals experience the same issues you do , no matter what business you’re in. As you grow more successful, your response to the obstacles you encounter will shift the “game,” leaving your competitors behind. It’s crucial to remember that these difficulties are just that: difficulties that you can overcome with the right passion and enthusiasm.

Being a business owner, it is important for you to think about how you can minimise the impact of financial insecurities on your business. Consider getting business insurance to protect yourself from such risks. To learn more about small business insurance, click here.

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