Guest Post | Sep 27, 2022
Image: Unsplash
The COVID-19 pandemic severely affected small businesses in Canada, leading to a drop in optimism. Roughly 20 percent of small enterprises with 1 to 19 employees expected a short-term decrease in sales for Q4 2021.
While the economy is recovering, business owners still struggle to overcome financial hurdles. Read on to learn more about these challenges and how you can address them.
Rising Costs
One significant hurdle that startups face is getting funds to keep the company going. Unfortunately, rising costs can make it challenging to keep a business afloat.
About half (50.3 percent) of Canadian businesses in 2022 expected higher cost of inputs would be an issue. Entrepreneurs believed that the rising cost of labour, energy, and raw materials would make it harder for companies to continue operations.
Business owners need new sources of funding to manage higher overhead. They need enough money to keep the firm running and for emergencies.
Finding the right source of financing is crucial in addressing this challenge. You can apply for conventional bank loans or look for angel investors. Grants or capital from venture capital (VC) firms are also viable options.
Each option has its advantages and disadvantages. Before making a decision, do research to find out which best aligns with your goals.
For example, getting loans from traditional institutions typically involves meeting strict criteria. On the other hand, modern online lenders like FlexMoney have less stringent requirements. Applying for a loan is also more convenient.
If eligible, try to get grants from educational institutions or government agencies. The main advantage of winning a grant is that you do not have to pay anything back. Unfortunately, you have to compete with other startups to win the funds.
Maintaining Profitability
To maintain profitability, a company must boost revenues and limit expenses. However, some firms still find it challenging to stay on budget.
To address this issue, you must focus on the two factors below:
Growing revenue
You can grow your revenue by experimenting with new delivery and sales models. Doing so can help you improve customer satisfaction, which can boost sales.
Another simple strategy s offering loyalty programs or coupons. You can also try bundling your products or services. These options can help you increase revenue by encouraging your customers to buy more.
Operational efficiency
To maintain profitability, you want to boost operational efficiency within your business. You must take full advantage of innovation efforts to run your company better.
Using new technology to determine your best product mix is easier than ever. You have your choice of tools for automating many processes like order taking and product delivery. However, you want to identify the tasks you can automate before buying any solutions.
Cash Management
Acquiring more funds from revenue growth can present new challenges. Many businesses experience serious difficulties stemming from the lack of proper cash management.
As a business owner, you must have a clear understanding of your company’s finances. To help address this issue, you will need a cash management strategy.
See: C.D.Howe Report: Canada’s Weak Business Investment Threatens Prosperity
When creating a cash management plan, keep these points in mind:
- Account for all day-to-day expenses.
- Ensure you can cover fixed and variable costs.
- Make payments to vendors and outside sources on time.
- Keep accurate records of the company’s current financial state.
Poor management of funds could have disastrous results. You should hire an accountant to help organize your finances so you can manage the company’s money better.
These are three financial challenges modern enterprises face today. Knowing how to address these problems lets you save on cost. It will also allow you to focus your efforts on other business areas.
Sources:
https://thefutureofthings.com/16327-top-5-financial-challenges-for-startup-businesses/
https://www.grantthornton.ca/insights/how-do-i-restore-profitability-in-my-business/
https://www150.statcan.gc.ca/n1/daily-quotidien/220225/dq220225b-eng.htm
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