small business challenges
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Small business ownership can be an enriching journey. Starting the business is usually the easiest part. From that point forward, ensuring that the business is sustainable can often be a challenge that many small business owners struggle with, sometimes for the entire journey. There are challenges that all businesses face, small or large, like hiring employees, building the brand, fine-tuning a product, and so on. But as an owner of a small business, it is essential to understand these particular challenges that face small businesses and only small businesses.

Let’s talk about these challenges.

Throughout the business journey, it’s important not to hide from challenges, as they often tend to get worse as time goes on. Instead, work to understand the challenges so that you can make better, more informed decisions that best benefit the business and you as the owner.

Dependence on Clients

How many clients do you work with? If you rely on just one or two clients to generate income, you’re more like an independent contractor for those entities than a business owner yourself. You never want to put all of your eggs in one basket; that’s a common theme in business ownership. For example, if one customer makes up more than 10% of your income, we refer to that as a sales concentration.

Regardless of that top client’s quality, it’s important to diversify your client base to generate income should something happen to that top client. This will significantly help limit the chance of your income completely disappearing overnight.

What would your budget look like if you lost your biggest client? How would that change the way you approach the business? If you can expand your client base and each client makes up less than 10% of your income, that would be a huge relief for you to know that your business won’t suffer if you lose a client or if they decide they can no longer afford your services.

Owner Dependence

How much does your business rely on you, the owner, to produce income? If something were to happen to you, does the business still make money the next day? Can you go on a vacation and still bring in money to pay your bills? Or does everything come to a grinding halt?

This is a struggle for many small business owners because often, in the beginning, they are the business. And the dependence on the founder can usually be traced back to the owner not being able to let go of certain decisions or responsibilities as the business gets bigger.

In theory, this challenge is easy to overcome by hiring good employees or partners who can take over when you’re not around. But this usually means compromising on the quality of work or manner that work is completed, atleast in the beginning, until the person learns the most efficient way to operate.

Balancing Quality and Growth

Growth should never cause your quality to suffer, but sometimes there is no way to avoid issues that arise as growth happens. It’s very important to maintain growth year after year, but there are times when issues that arise from growth can seemingly outweigh the benefits.

In owner-dependent businesses especially, the owner’s personal touch, attention to detail, and engagement makes the business successful initially. This leads to business owners being stuck in these processes and habits and unable to develop and grow the business beyond themselves. There is a middle ground between obsessing over every sale and final product that goes out the door and producing work that doesn’t represent your business accurately.

Burnout

Remember the enriching journey that we talked about? The balancing act and the constant pressure of performing and pleasing customers can wear down even the most determined business owner. This is why business owners work longer hours than their employees and constantly fear that their businesses won’t survive without them. So to avoid those issues, business owners bury themselves deeper in work and often don’t take any time away to recharge, refresh and reset.

Exhaustion and burnout can lead to poor decision-making. It’s important to be aware of your capacity as an individual and give yourself a break, even if you don’t feel like you NEED IT because you do need it.

Money Management

Small business ownership is expensive. It’s not cheap to start a business, and it’s not cheap to run one. Having enough cash to cover the start-up costs and the monthly bills for a business is crucial. That’s why keeping significant cash reserves in the business bank account is important. The business bank account is not your personal bank account, so don’t treat it as such.

Remember, the $1,000 deposited into your business bank account is very different from the $1,000 deposited into your personal bank account when you had a W2 job. The $1,000 deposited into your business bank account doesn’t have taxes withheld and it doesn’t have expenses taken out that it needs to pay for. Sometimes, your take-home from that $1,000 sale might only be $300.

Welcome to your new life as a business owner!

business owners facing challenges
Business owners with razor-thin margins.

Money management and oversight from an accountant and a tax professional are incredibly important to your business’s sustainability. From the second cash begins flowing through the business, a professional should be involved to ensure that you are maintaining accurate books and records, paying the taxes that you owe (but not a dollar more), and have good financial information to make informed decisions.

These challenges are just a few of the battles that small business owners have to face every day. At ENGAGE CPAs we work with so many small business owners every day that it allows us to have a unique view of small business owners all over the country. We see that no matter where you are in the country,

which industry you’re in or what level of education you have, these challenges are real and present every step of the way. Trust me when I tell you that you are not alone in these struggles.

We also know that not every business owner can afford to engage an accountant or bookkeeper to be on their team from day 1. But we don’t want that to stop you from having the information about doing small business ownership the right way. So we created courses based on all of the topics we help clients with every day.

The Business Starter Kit introduces small business ownership to sole proprietors and single-member LLCs businesses; it’s perfect for someone just starting in business or as the next purchase after registering your business with the state.

Command Your Business is everything you’ll ever need to take charge of your business. We talk about how to pay yourself, what you’re taxed on, what is a business expense, IRS myths, what is a red flag to the IRS, how certain deductions work, how to read your financials, how to create a budget, and so much more. It’s self-paced, no live classes, no homework or in-person presentations, just learn more about your business, how you can run it better, stay compliant, and take command of your business.

Use the code 5FACE for 25% off of both courses. And yes, of course, it’s a tax deduction!

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