Small business biggest challenge

[ians]

What is the biggest challenge for the survival of a small business?

Capital.
Business plan
Turnover
Customer base
blah blah blah ...the list just goes on and on

My opinion, customer payments, I am not talking about the R100 000 payments, they will bust you within a couple of months if not paid, I am talking about those little ones.

You ask why, I have been going through some changes in past few months, looking into ways to become more effective, spending less, trying to find what it is that affects my business the most and how. Today I came up with one of the biggest issues and what affects my growth or what could eventually cripple my little business. Some might say but that's what an overdraft facility is for...mmm your overdraft can only carry you for so long.

I have been winding up the sole proprietor operation, and boy was I in for a surprise with the amount of money I have had to write off and outstanding debts.

Going forward now with the CC I decided not to make use of an overdraft facility and I can now see why having an overdraft tis not always a good idea in a small business, (this is my take on it)you tend to run up the overdraft and sit there with this debt over a period of time which just never seems to go away, much like a credit card ( that's why my credit cards have R500 limits) The reason for this, those little outstanding payments which over time end up restricting both expansion and general day to day operation.

What I have found is that R500 or R1200 little amounts start adding up, you think, well I will just write them off, but every month there is a little more and a little more, until eventually your overdraft is maxed out or you apply to increase you overdraft and because you are turning over xxx amount the bank increases it. The problem is that it can only go on for so long then it will restrict your operation.

So how do you overcome this problem, I would like to hear from other small business owners how you overcome this problem.

An interesting fact, not one of my customers who had companies when I started my sole prop operation over 20 years ago is still operating, every single one of them has gone bankrupt or sold the business.

Maybe that what I should strive for this time around, to build the CC to sell.

[Justloadit]

Just remember to sell a business, it must be able to run with out you at the helm. If it can not do this, then it is not salable, as the person buying it will have to run it the way you do, and simply this is not going to attract any buyers.

[ians]

I agree, and guilty of exactly that.

I don't agree, with people trying to steal business ideas, I have an electrical business there is no idea to steal, it is simply I do electrical work.

I have pointed this out on many occasions, it is more about letting go and trusting other people to do the job as I would do it.

I know, I have a saying in my business "if you want something done right do it yourself" this sentence is one of the biggest restriction in most small business growth.

You have to let go and trust that other people will do what they are paid to do, this is where a good supervisor, manager comes in, but if you are too busy "running the business" who will manage the staff and make sure things are done right?

What I see in many a small business is a person who has qualified as an artisan or something and feels he can make a go at it in business. The mistake is becoming a good electrician or plumber or even accountant for that matter doesn't make you a good businessman.


The day you decide to start a business there are certain rules

Rule no.1...make sure you are a good businessman.

there are a lot more, if you google them, there are studies and thick books which could take you a life time to read, yet the fail rate of business is a lot higher than the success rate by a huge margin, maybe too many people writing books and studies and too little putting them to practise.

Which brings me to another point, how many people can tell me how to run your business, I am sure many of you can relate to this especially the ones who have never actually had their own business, but they can tell you how to run your business and what you are doing wrong

[Lizz]

Any recomendations on Books that u can read to help me have all the skill to be a good businessman? Taking over a small company soon, am nervous but excited. Alot of potential to grow this small business so i wane go prepared...

[SilverNodashi]

Any recomendations on Books that u can read to help me have all the skill to be a good businessman? Taking over a small company soon, am nervous but excited. Alot of potential to grow this small business so i wane go prepared...

There are way too many to read

[HR Solutions]

Any recomendations on Books that u can read to help me have all the skill to be a good businessman? Taking over a small company soon, am nervous but excited. Alot of potential to grow this small business so i wane go prepared...

I woul recommend Bussiness for Dummies

[wynn]

Depending on your markup and number of bad debtors, there is a break even point where it is not feasible to give credit!

Assume a 50% markup on the same item or service, if one in three don't pay then you are just wheelspinning for no return at all, and the figure climbs exponentially for every percentage less than 50%

At 20% markup you need to do five more transactions to break even so that is a loss of six potential deals.

Sometimes it pays to just ignore the deals that require credit and concentrate on cash deals.

[pmbguy]

I share your frustration. I also have a small business (Office Automation) and I also have issues with cash flow from time to time. In my particular case I have a handful of big businesses that have a 2 month payment policy. So I get a large order for equipment from them and then I have to wait for 2 months to receive payment. My suppliers are all 30 day accounts, some even cash. I manage to negotiate with some of my suppliers to wait until my client pays me, but this only applies to a few of them, most of them won’t budge. My clients with this payment policy (2months) are huge business and they simply don’t change their payment policy for nobody. I tried to negotiate terms but they just flat out refuse. I remain polite with them about the matter as not to compromise our relationship, But this really adds unnecessary stress and it makes me mal.
Personally I don’t turn down business because of this delayed payment policy when they place very large orders, I will rather empty my savings account or sell my gold, but never turn them down. So I won’t turn down business because of cash flow, but I will outsource (if possible) the job if I feel I can’t provide the quality service I would like to provide for that specific client. That way I don’t lose face and still made the dollar.
Having said all of this I still feel that it is not fair that some of these big guys don’t pay 30days like the rest of us mere mortals

[Justloadit]

Try getting as 60 day account from the big corporates, they tell you to take a hike, just not fair.
I am fortunate that my client is 30 days, but earlier this year, some months were 60 and 90 days, boy did I sweat blood. Anyway it seems they are back on track. My problem is it takes me 8 to 12 weeks to complete the orders, and my 30 day account just disappears, making the financing of the business a bit of a night mare. Fortunately my biggest supplier gives me 60 days, which helps. I never abuse this and am always in contact with my supplier, just in case I need more from him.

[IanF]

Our rule is first order is at least 50% with the order. Balance on delivery. I have a standoff with an old customer who wants us to do a calendar design and then they will pay a deposit, she went bankrupt a few years ago and owed us R15k. Now her terms are payment with order. I would rather lose her as a customer than take a risk.
Then we did some printing for a bank on Thursday and quoted them cod, they paid cash when we delivered.
The more confident you sound and feel when discussing your terms the more they are just accepted.