If you are in business for yourself, you probably will face or have faced a number of small business problems.
Here are 5 of the most critical issues: 1) cash flow 2) working capital 3) having the right staff and keeping them motivated 4) having the right insurance and not overpaying for it and 5) how to increase sales without spending a fortune on marketing.
My experience tells me that all these problems can be resolved, and often the best solutions are also the least expensive. Let’s take a look and see:
1. Cash Flow
Cash flow is the lifeblood of your business. And if you are short of cash, you run the real risk of going out of business pronto. Fortunately, there are several ways to rejuvenate your cash flow without borrowing money.
While it’s difficult to speed up receipts, it’s often fairly easier to slow down payments to vendors. Even if you have signed contracts with suppliers, go speak with them. Don’t just slow your payments though. Explain that you need more time to satisfy your payables. No, they won’t be dancing in the streets and naming their next child after you when they get this news. But they’ll understand. After all, they know it’s better to work with you and help you stay in business. The alternative (trying to force you to keep terms you can no longer adhere to) won’t do them any good if it forces you out of business.
2. Working Capital
Working capital is really just another way to solve your cash flow challenges. Let’s say you own a thriving pizza parlor. You can’t make those pies fast enough, and your customers are begging you for more. You have a chance to expand your restaurant, but you don’t have the money to do it. Your profit from making and selling pizza is fine, but you haven’t budgeted any money for growth. Your best course of action here is to do two things:
1. Estimate how much extra money this expansion will bring in. Do a cash flow projection to guesstimate how the cash is going to flow over each of the next 12 months and thereafter. This will tell you how much you can afford to spend and if the expansion is worth it. Make sure that you go over your projections with an objective friend who has no horse in the race either way.
2. Assuming it makes sense to start borrowing money for expansion, show your pro forma projections to friends, relatives and even happy customers. Offer them a competitive interest rate in return for a loan. At the same time, try a peer-to-peer lender like Lending Club. Many small business owners have been very successful in raising relatively modest amounts of money (say under $35,000) with peer-to-peer lending when they were turned down by traditional banks.
If you have a good story and strong numbers, individuals may jump on the chance to invest in you. Peer-to-peer lenders have much greater flexibility than traditional bankers.
The backbone of your business is staff. Without excellent people on your team, your business will fail. My first rule is never make excuses for anyone. If you have a small business, it’s often hard to keep professional distance, but it’s crucial. There is nothing wrong with growing close to the people on staff. But you must demonstrate and demand high standards.
Without bragging, I must tell you that the people who work with me are 100% A+ folks. They always go above and beyond for our clients, and I let them know. The best way to keep great people motivated is to follow these four rules:
a. Demonstrate what you want to motivate.
b. Be quick to admit your own mistakes.
c. When mistakes happen, differentiate between honest mistakes made with good intentions and other mistakes made with no intentions (or worse). I have no problem when people I work with make errors – I make them too – as long as they made the mistake in a way that demonstrates real concern for our clients and our business. But if someone is lazy or just doesn’t care, I find that difficult to live with – so I don’t.
d. Be generous with your praise when it’s deserved.
I look for opportunities to call out and reward great behavior. This reinforces the behavior I’m looking for, and quite frankly, it’s how I like to be treated as well. You don’t have to pay an arm and a leg – but you do have to be competitive. But the key to having great staff is investing time in your people.
Show them you care about them, but maintain a professional relationship. Demonstrate what you expect from them by living up to your own standards.
I have to admit that when I read those insurance policies, my eyes glaze over. It can be very difficult and time-consuming to make sure you get the least expensive insurance. That goes for everything from your own life insurance to your product liability insurance.
The solution? Get agents working for you. Go over your policies with your agent at least once a year and make sure they explain them to you. Speak to other agents and let them compete for your business. If nothing else, you’ll get an education and you’ll probably save some money along the way.
This can help you with your business insurance, disability policy or even liability coverage.
5. Increase Sales
No matter how great your entrepreneurial ideas are, you need sales. Of course, the answer depends heavily on what kind of small business you run. But most small business owners can increase sales and business without emptying their bank accounts.
I met with an attorney who was interested in growing her practice. She was just about to hire a man who billed himself out as an internet marketing specialist. The guru wanted to charge my client $1,000 a month for sprucing up her website. I suggested that she use that same money for direct marketing using a pay-per-click campaign. Jane never heard of this option, and her guru never mentioned it either.
The moral of the story? Just because you don’t know how to boost your sales, don’t assume that you have to pay an expert to tell you what to do. Interview other business owners. Ask them what they suggest. If I’ve learned anything over the last 26 years, I’ve learned that people really enjoy helping others. Tap into that. You’ll get honest ideas that can help you from people who have no interest other than to see you succeed.
What other small business problems have you encountered? Do you have any cool ways to solve those problems in a unique, powerful and inexpensive manner?