Finance horror stories — cover
Caution: keep on reading at your own peril

The Terrifying Tales of Small Businesses. Part 3 — The finale.

It’s time for the grande finale of our exclusive Halloween series. So, light the candles and take the time to read these truly terrifying tales of things that could go wrong with your small business — before it’s too late.

What you are about to read is a documented true horror story, and it is the stuff of nightmares; the kind of things that people never forget. Horrible to live through, but in the long run, very useful — wit lessons that ensure the success of future projects.

These small business owners relive their tales of terror around the metaphorical campfire, so you don’t have to.

Warning: The following stories may be relatable and cause nightmares.

Part Three: The Recurring Nightmares of Small Business Owners

Of course, we saved the most horrifying story until last, here we have five mini tales of terror.

The road to success when the responsibility lies solely with you is fraught with risk and can be quite a scary place to face alone. So, we’ve picked out some of small business owners’ worst nightmares and a few insights that will hopefully banish those nagging fears.

Warning: The following may cause you to ask yourself; what are you afraid of?

1: Sinking Ghost-ship: Failing to stay afloat

Having a cash-flow crisis is high on the list of problems encountered by small business owners. Independent Growth Finance’s (IGF) Small Business Survey 2020 revealed that over one-third of small businesses had cash-flow problems in the two years before the survey. Worse still, 43 per cent reported having to use their own personal assets as a guarantee for their business or to solve cash-flow issues.

While certain industries seem to experience cash-flow problems more than others, it can be a problem that affects the future of their business — especially when they don’t have sufficient protection from their small business insurance. This means when the funds dry up and the banks don’t lend you’ve got to get creative.

Even if you do manage to get your hands on an overdraft or a bank loan, the interest rates can be crippling. One alternative method you could use is invoice financing, this frees up cash when times are tight.

This method is where a third party buys your unpaid invoices for a fee. They give you a percentage of the invoice amount upfront, then collect the debt originally owed to you by your customer and give you back the remaining balance.

This method also allows you to get hold of a percentage of the money you’re owed by your customers straight away to get you out of a tight spot. However, it’s worth considering that you could end up losing profit from orders or services that you provide. Also, depending on the way your invoice financier deals with your customers, this may cause reputational management issues.

2: The NetherRealm: You’re not living in reality

Ambition is fantastic, delusion, on the other hand, is scary. A lack of real-world thinking when it comes to business plans can be fatal. The bottom line? You’ve got to know how to plan.

A well thought out business plan can help you map out how your business will grow and develop over a set period of time, and with solid projections, banks can be more confident — and more generous — in their financial support. A good plan should include:

  • The main business ideas and long term objectives
  • Progress benchmarks
  • A breakdown of the finance you need, and essential outgoings such as small business insurance
  • Potential risks to your business
  • What you need to operate
  • A sales forecast and figures marking out profit and loss
  • A consideration of your competitors
  • Your marketing objectives and strategy.

Convince a bank, your customers and your suppliers of your performance plan, and you’ll ensure you have the funds to keep your business running.

3: Stuck in Limbo: All your eggs are in one basket

So you’re up and running and not doing too badly? Now’s the time to look at where your money’s coming from. Being too dependent on one client makes your business vulnerable, should the status quo suddenly change. The biggest fear listed by the small businesses was the failure to attract new clients, with 34% worried this will impact their business.

That single client could run into financial difficulty themselves, refuse to pay for your service or be unable to for long periods of time or simply no longer have any need for your business. While you just have this client as your one source of income, you’ll be at risk of having your entire income wiped out in one go.

Ask yourself, does the client have a consistent need for your product or service? If the answer’s no, then you’ll need to start winning new business or diversifying your revenue streams.

4: Ghost: No one knows who you are

It’s hard to diversify a client base when nobody’s heard of your business. What’s more, they not only need to hear about it but they need to be persuaded, convinced and excited.

Marketing is one way to combat this. It doesn’t mean throwing thousands of pounds your company doesn’t have at a fancy advertising agency. In fact, 83 per cent of buyers said that along with advertising, they’re also putting their faith in user recommendations online. Getting recommendations means people are already aware and talking about your business, solving one of the most common problems faced by small businesses.

Ask your clients to review your business, you may receive some great compliments, along with some hard truths, but you can use this to better understand your clients’ needs.

5: Doppelgänger: Becoming a statistic

According to the House of Commons, UK businesses are currently failing at the same percentage rate as they’re starting up. While in real figures, the number of businesses that make it is slightly higher than those that don’t, however, that has only been the case for the last three years.

It’s not all doom and gloom though. Since the year 2000, small and medium-sized businesses in the UK have actually increased by 41 per cent. However, as you might have guessed, there’s a catch.

There’s no doubt that the path to success for SMEs is full of scary obstacles, and although entrepreneurs can try to safeguard against common risks, there’s virtually no way of preparing for every problem that faces small businesses. But for every fear, there is a way to conquer it and while starting up by yourself can be terrifying, it’s also exhilarating, enjoyable and hugely rewarding, and it’s often the drive and passion that led to the creation of the business that will see you through those darker times.

Light at The End of The Tunnel: Using an All-In-One Finance Management Tool

Try using a free cash flow management tool such as Airbank. Airbank is a unified financial management solution that marries your bank statements to generate your cash flow statements automatically. That way you don’t have to go through the messy process of waiting for your accounting statements, or transferring and categorising all your transactions yourself.

Airbank allows you to connect your bank accounts, which auto-categorises all your historic transactions. In addition, you can also initiate new payments and have them categorised for your cash flow statements from the get-go as well. Airbank then produces your direct cash flow statement for you in real-time and even lets you input your cash flow forecast numbers in the spreadsheet based on your planned billings.




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