When looking at the mistakes of failed small businesses, each business’s demise appears to have at least one thing in common. It turns out that the mistakes they made weren’t related to simply going about something the wrong way. They’d didn’t choose the “wrong” marketing strategy, release the “wrong” product, or invest in the “wrong” people. In most cases, the mistakes were actually assumptions. The business owner assumed that one move would always lead to a certain outcome, or that a certain way of doing things would always be easier than an alternative. In reality, however, this was actually a recipe for disaster, and the expected results were not achieved.
You can chalk it up to being stubborn, or refusing to accept the amount of thought has to be put in to so many business activities. Here are three dangerous assumptions to make when growing your small business:
1. You Can Stop Marketing When You Have X Clients
As problematic as startups can be, one thing they tend to do right is understand the importance of business development. This ambiguous term refers to the act of searching for and courting new clients. The logic behind it is hard to deny: no clients = no business. Prioritizing business development means continuously marketing yourself, even when it appears like you don’t have to. For example, many businesses assume that once their client roster is full (or close to it), they can stop pouring money into marketing. Why market yourself, a business owner might think, when you barely have enough time to service the clients you already have?
This seems like a completely rational idea until one of your current clients cancels or just disappears. The business is suddenly scrambling for new clients while their revenue stream gradually becomes thinner and thinner. If the business had extra working capital to maintain marketing campaigns all throughout the year, this potential crisis could have been avoided. Since perpetual marketing is vital for so many businesses, companies like United Capital Source offer small business loans geared towards long-term investments but without the fixed, monthly payments or interest rate systems of traditional business term loans.
Another (and probably more realistic) solution is having access to extra working capital to supplement the sudden loss of a client. With programs like working capital loans or revenue-based business loans (aka business cash advance), you can cover regular business expenses as you search for a new client and then pay off the majority of the debt when your previous revenue stream returns.
2. Don’t Pay For What You Can Do Yourself
The error in this mentality is clear as day for anyone with a strong work ethic. If you truly believed you shouldn’t pay for something you could do yourself, well, you wouldn’t pay for anything at all. Think about it: Is there really anything you couldn’t learn to do yourself? Give yourself enough time and you could become a marketing wiz or a graphic designer or an accountant. But you don’t have anywhere near enough time to do these things. Sure, you might be able to built your own shelving for your storefront or be your own customer service representative. But some areas demand the help of an expert, and it’s okay to admit that you don’t the first thing about them. Not every business owner has to be a jack of all trades.
What makes this predicament so troubling for smaller businesses is the fact that the need more services (like social media) arises long before they have the additional income to afford it. With the right small business loan, you can bring in that new service even though your income is not slated to increase for a number of months. At United Capital Source, we offer numerous business funding programs, like a merchant cash advance, that can be approved when business is slow. This type of working capital loan deducts smaller payments up until sales volume increases, which lessens the new service’s impact on your operational budget.
3. Just One Invoice Is Enough
If your cash flow revolves around invoices, you need to take extra measures to ensure those invoices are paid. Plenty of businesses assumed their clients would pay promptly after sending one invoice per month. But then they find out the client did not receive the invoice, would not be able to pay it by the expected date, or was not aware there was an expected due date in the first place. If you don’t have a solid payment timeline for invoices, you could end up with a massive influx of cash at the end of the month and nothing throughout the rest of the month.
You might conclude that following up on invoices or sending multiple invoices takes far too much time out of your work day. This all-too-common scenario can be solved with accounts receivable factoring, in which a small portion of income is sacrificed in exchange for being paid right away and saving the trouble of checking up on invoices. And since accounts receivable factoring is so beneficial for businesses that require a scheduled payment timeline, the money you receive for selling the invoice can be distributed in spurts throughout the month.
As you can see, these three assumptions are largely rooted in one general assumption, which is the cost of keeping your business running smoothly. This cost has risen significantly as of late but companies like United Capital Source are here to help you adapt to new environments. Seemingly minor mistakes are now potentially fatal, so you’ve got to make more an effort to prevent them by enlisting the security of a small business loan.