Running a small business is no easy task. There are plenty of costs, and finding customers consistently is such a challenge for some business owners that they eventually close their doors. Additionally, these challenges can bleed over into personal finances causing even more issues. The good news is that if you know about these challenges in advance, it can be much easier to overcome them when they do arise.
Does your business idea require more money than you have to get it off the ground? If so, you’ll need to raise start-up capital for your business. There are many ways to do this. Business owners may qualify for lines of credit or loans through a bank. Or they can pitch their idea to investors and hope for the best. Raising capital can be the hardest part at the beginning because you have to prove an idea when you don’t necessarily have proof that what you want to do will work. But that’s some of the excitement of being a business owner. You get to forge new paths and learn to persevere.
When it comes to getting lending for something like a house or a car, it can be a little more involved than if you were in a 9-5 W-2 role. With no proof of income, loans self-employed people get look a little different. There is often additional documentation required to get the loan and the way that the income is counted means that you may not qualify for as much money as you anticipate. Additionally, you may need a cosigner depending on the kind of loan you’re getting.
Small business owners don’t get the luxury of using their employer-provided insurance. Instead, they need to go find their own. This means that they can often pay thousands of dollars just to be insured. Business owners can use the health exchange for themselves, and they can often qualify for great insurance plans for a fraction of the cost of going completely on their own.
Did you know that most small business owners don’t budget? Can you imagine what would happen if you never budgeted your personal finances? You might end up saddled with unnecessary debt or worse, go bankrupt. This is unfortunately the plight of many small businesses. They don’t budget and end up overspending. These poor habits ultimately lead to businesses needing to shut their doors.
If the cost of the goods you sell increases, it means that you’ll need to raise prices in order to make a profit. But raising prices too sharply may scare away some of your customers. Inflation is one of the financial challenges that business owners need to consider.
Additionally, supply chain issues can cause a backlog on ingredients you need to make a product with or a reduction in the supply of essential items to create your products. These aren’t financial issues that the average person thinks about, but as a business owner, you’ll need to make a plan for how to handle what you’ll do when it happens. Inevitably something you need will be discontinued, unavailable, or more expensive, so you’ll need a plan in place to handle communications for this problem.
Letting Go of the Idea of Paid Time Off
When you’re first getting your business off the ground, you may need to put in longer days and work an extra day a week to get it moving. It also means that unless you hire someone to work for you right away, you’ll be the only one working. You need to give up your mindset of needing paid time off for the hours you put in. It’s not a one-to-one exchange when you leave the 9-5 grind.
You may need to bring your work with you on vacation even if you do leave someone behind to take care of the work. You may even need to go a year or more without really having a day off. This can take a mental shift that’s more than just a financial shift. And for people who start as solopreneurs, they know that unless they are working, money isn’t being made. So let go of the idea of PTO in the way you’re used to.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.