Top 4 challenges of running a small business
When thinking of the challenges that face so many small to medium sized businesses, a saying by H. Jackson Browne comes to mind: “Don't be afraid to go out on a limb. That's where the fruit is."
How tempting it is as a small business owner to play it safe and never venture to take your dream to the next level.
However, business owners are faced with a plethora of challenges, bombarding them and causing many to remain static for fear of failure. Addressing these issues pre-emptively can often mean circumventing problems before they arise.
Creating safety nets such as public liability, professional indemnity and business interruption insurance have become a critical tool in protecting your business, staff and livelihood.
Let’s take a look at a few issues and challenges facing SMEs along with methods to help you stay solvent and flourish.
Loss: pre-empting, prevention and precautions
Figures released by the State Government of NSW indicate that as of June 2016, retail theft had increased by 6.3 per cent over two years.
Whether the definition of loss refers to theft, fire, fraud or some other cause, the basic prevention measures are the same. Pre-empting these situations, backed up with suitable insurance coverage, is the wisest two-pronged approach.
Some methods to secure your stock involve:
- Surveillance and security systems, including CCTV and anti-theft devices
- Staff training in disaster prevention and good workplace safety
- Comprehensive business insurance. This would include theft, fire and flood insurance, as well as public liability and business interruption. As your business grows or changes, it's also important to assess whether you are currently under-insured for your requirements.
Weathering the seasons
One of the biggest stresses to many small business owners is being able to maintain cash flow, especially when staffing and premises overheads need to be met regularly but customer payments follow no such strictures. The ebb and flow of seasonal income fluctuations affect many businesses and means that planning for lean times is imperative for maintaining a balanced financial equilibrium.
According to Ian Harris, Managing Director of Redback Health Services, a consultancy based business in Melbourne, before opening their doors owners need to have a buffer of working capital and a bank overdraft in place.
“In retail you get paid as soon as you sell stock,” Mr. Harris states. “However, in a services business, it can be a process of months between invoicing to payment.
“With consultants and employees still expecting to be paid at regular intervals, the drain and strain on a business’s bottom line is obvious.”
Forewarned is forearmed and formulating a contingency plan enables you to manage your cash flow more effectively.
IT: reality bites
As SMEs move further into the realm of technology dependence, another considerable challenge has evolved around system failures and cyber-attacks. A disturbing 60 per cent of cyber-attacks are aimed at small to medium business. This is particularly alarming, as they often struggle to recover if their data is compromised.
Again, the solution is twofold, involving:
- Investing in and maintaining, cyber security software, and
- Putting into place comprehensive insurance coverage which will act as a safety net.
A tradies tale
So what about the lone wolf — the tradies working through both on and within their own business? What challenges do they face?
According to carpenter Serge D’Angelo of SPD Home Improvements, a substantial challenge to tradies is time management. He laments, “finding the time to juggle job prospecting, quoting and invoicing with the demands of performing the work is a major issue.”
“Flexibility is key in managing your schedule,” he goes on to say. “That may mean quoting and paperwork are booked in for evenings and weekends—it’s not a 9 to 5 job.”
He adds that, aside from the mandatory public liability insurance, products such as income protection insurance are vital to a tradesman who relies on his physical ability to work. Even a matter of a few weeks off work could jeopardise a tradie’s reputation and livelihood.
Safety net of insurance
Before opening the doors of your business, ask yourself a few pertinent questions:
- Are you prepared for variations in cash flow due to seasonal and market fluctuations?
- Do you have a contingency plan in place in the event of injury or illness?
- How secure are your support systems, including your IT and databases?
- Have you done a health check on your insurance coverage to make sure it fills your needs and you are not under-insured, especially in the event of an unforeseen setback?
A great place to start your business journey is to speak with the experts at CGU Insurance. We offer the ease and convenience of a Business Package along with advice, training and resources to give you the confidence to get on with the important stuff:reaching out to attain that prized fruit – a successful business.