Running a business can feel like riding a rollercoaster; in other words, fantastic fun with amazing highs but, sadly, also some potentially unexpected lows. Often, the dips can be attributed to naivety and inexperience in either getting a business off the ground or taking it to new heights.
When you are attempting to spur your firm’s growth, watch out for the following sources of money drainage. Otherwise, too much of the money you do make could quickly be swallowed up.
Leaving yourself to pull all of the levers can afford you an easily appreciable amount of freedom. However, when you don’t quite have enough hands to… well, handle everything, you might want to consider sourcing your first employees. Alas, in doing so, other issues could arise…
According to one estimate mentioned by Inc., onboarding – funding the likes of taxes, benefits, training and bonuses for a new employee – can cost 1.5 to 3 times the position’s salary.
As you bulk out your tally of employees, you might struggle to grow your profits. This is an especially common issue for small businesses of about five to ten employees – and, while you might be quick to blame many things, don’t overlook that you may be focusing too much on being the “low-cost” firm.
One risk of the “low-cost” approach is that your rivals might have better resources and economies of scale that more than make up for your advantage on price. Therefore, don’t neglect to hone your innovation and optimisation endeavours.
This can very much feed into the previous point, as your attempts at profit-making could come to little if your revenues are floundering. Worse, you might struggle to discern exactly why they are faltering, as the source of the problem is probably largely unique to the business in question.
However, one possible cause is that you didn’t study the market sufficiently closely before entering it. Entrepreneur implies that a shrinking market could hamper your revenues.
You rely excessively on one client
If your business is small, especially if it has fewer than ten employees, then a varied base of clients could prove crucial to your firm’s long-term stability. You should especially heed this if, right now, a single customer is responsible for over half of your company’s income.
What would happen to your firm if that customer fell on hard times? It might not bear thinking about, so look for lucrative work from more clients if you deem this wise.
Failing to keep a cushion of emergency cash
No matter how diligently you may monitor your firm’s finances, hiccups in cash flow can be as inevitable as… well, hiccups full stop. For this reason, you should prepare in advance for the occasional “slow sales month”. Setting aside a pile of savings could help here, says Entrepreneur.
If you fall ill or vital corporate equipment picks up damage, covering the financial opening with business interruption insurance from a broker like Be Wiser Business Insurance is another option.