What small business owners fear most

[Dave A]

This recent Gallup poll of small business in the USA is pretty revealing.

How different is the situation here in South Africa?

What poses the greatest threat to your business?
What gives you the most problems in your business?
What is your greatest fear?

[Mark Atkinson]

I'm not sure if my answers will be relevant because of the unique situation I find myself in as well as the way we run our business, but:

I'd imagine that the situation is similar, if not even worse in terms of government regulations hindering the growth of certain small businesses. My business luckily doesn't have to comply with very many regulations in order to succeed and I don't compete for tenders to government institutions We don't tend to get asked for BEE certification either. That being said, being in the personal service sector, we don't qualify for benefits as other small businesses do.

Our biggest threat would probably be our competition. Extremely saturated market with no barrier to entry - not easy to set yourself above the crowd because of all the "noise".

Our biggest problems aside from competition come from the sheer magnitude of the cost of marketing a business in our field. Targeting an online audience in our field is most certainly NOT cheap. Calculating our ROI and determining exactly what we are willing to pay for leads is a big part of our planning.

My biggest fear (again, probably unique and not relevant to this discussion) is that I won't be able to get the business into a position where it can thrive with very limited input from myself within the next 2 years - resulting in us having to close the business down. Reason being when I begin my articles it will mean 3 years of no time to run the business.

[IanF]

My biggest fears
Government red tape.
Changing technology, eg computer tablets instead of NCR forms.
Cost of new technology
Increasing cost of business from greedy municipalities and government utilities.

Anyway how do we strategise around this?

[mother]

My biggest fear the last couple of months has been cash flow... When I "retired" from the corporate world 4 years ago, I used my pension to start up my business, and I had enough savings to keep me (personally) going for 3 years. My business' setup costs have been high, and a lot of our expenses to date have been on R&D (very necessary, since we're in unchartered waters). The last couple of months I've had no choice but to draw a salary, even though we haven't reached the turnover target where the business can afford to pay me. This in itself wouldn't have been disastrous, if our debtors' payments were up to date. And I can assure you that the current economic climate is NOT the reason for debtors' non-payments. The debtors that are taking up to 90 days to pay a COD account, are the affluent ones, not the middle class ones. In total, we have over 1 months' turnover short in overdue accounts. THAT is disastrous! So right now I fear that if our cash flow problems continue, it could result in us not being able to pay our salaries, or force us to close our doors.

The biggest threat in our business, is the fact that I am the business. This will only change once we have grown big enough to warrant employing more head office staff (i.e. managers to take over specialist functions, a buying office to take over sourcing and a designer to feed the factory and customers).

What gives us the most problems? Admin. Since admin is not an income-generating function, it moves to the bottom of my pile every day. But the lack of good admin results in inefficient management and time wasted.

[murdock]

My biggest fear the last couple of months has been cash flow... When I "retired" from the corporate world 4 years ago, I used my pension to start up my business, and I had enough savings to keep me (personally) going for 3 years. My business' setup costs have been high, and a lot of our expenses to date have been on R&D (very necessary, since we're in unchartered waters). The last couple of months I've had no choice but to draw a salary, even though we haven't reached the turnover target where the business can afford to pay me. This in itself wouldn't have been disastrous, if our debtors' payments were up to date. And I can assure you that the current economic climate is NOT the reason for debtors' non-payments. The debtors that are taking up to 90 days to pay a COD account, are the affluent ones, not the middle class ones. In total, we have over 1 months' turnover short in overdue accounts. THAT is disastrous! So right now I fear that if our cash flow problems continue, it could result in us not being able to pay our salaries, or force us to close our doors.

The biggest threat in our business, is the fact that I am the business. This will only change once we have grown big enough to warrant employing more head office staff (i.e. managers to take over specialist functions, a buying office to take over sourcing and a designer to feed the factory and customers).

What gives us the most problems? Admin. Since admin is not an income-generating function, it moves to the bottom of my pile every day. But the lack of good admin results in inefficient management and time wasted.

ditto...20 years later i am still in this position...and if all the people who owed me money actually paid me the full amount outstanding i could start a bussiness and have the capital required to run my bussiness efficiently if i was the tax man and could collect all the money... interest and fees they charge i could literally pay off my bond and be debt free...but running a company in this country where it cost you more than the outstanding debts to collect the money...chances are i will be paying my bond to term

[Blurock]

My biggest fear the last couple of months has been cash flow...

What gives us the most problems? Admin. Since admin is not an income-generating function, it moves to the bottom of my pile every day. But the lack of good admin results in inefficient management and time wasted.

Poor admin may lead to cash flow problems. Late invoicing, not posting statements, wrong costing/pricing, not following up on delinquent debtors etc.

Admin and accounting is very important in any business. Although admin does not generate income, it may save you time and money. The business owner's time spent on checking and fixing things could be more productively spent on generating business and profits.

Do not employ a bookkeeper or admin assistant who can not perform at the required level just because they come "cheap". An unqualified person required to perform above their ability will cause more harm than good. Rather pay a bit more and get the job done properly so that you can carry on with your business.

Often small businesses can not afford such a person. Then rather consider a half day position or outsourcing that function until you can afford someone. Implement systems to be followed so that everyone knows what is to be expected. In the process you and your staff may also learn from this person and apply best practices in your business.

[Abdi]

My biggest fear the last couple of months has been cash flow... When I "retired" from the corporate world 4 years ago, I used my pension to start up my business, and I had enough savings to keep me (personally) going for 3 years. My business' setup costs have been high, and a lot of our expenses to date have been on R&D (very necessary, since we're in unchartered waters). The last couple of months I've had no choice but to draw a salary, even though we haven't reached the turnover target where the business can afford to pay me. This in itself wouldn't have been disastrous, if our debtors' payments were up to date. And I can assure you that the current economic climate is NOT the reason for debtors' non-payments. The debtors that are taking up to 90 days to pay a COD account, are the affluent ones, not the middle class ones. In total, we have over 1 months' turnover short in overdue accounts. THAT is disastrous! So right now I fear that if our cash flow problems continue, it could result in us not being able to pay our salaries, or force us to close our doors.

The biggest threat in our business, is the fact that I am the business. This will only change once we have grown big enough to warrant employing more head office staff (i.e. managers to take over specialist functions, a buying office to take over sourcing and a designer to feed the factory and customers).

What gives us the most problems? Admin. Since admin is not an income-generating function, it moves to the bottom of my pile every day. But the lack of good admin results in inefficient management and time wasted.

This is exactly my situation and I dont want to be too demanding on clients and scare them off but at the end I suffer.

[Justloadit]

This is exactly my situation and I dont want to be too demanding on clients and scare them off but at the end I suffer.

I also use to fear asking my customers for payment, but as time passes, the fear goes. Everyone knows you need money to operate. Overcome this fear, and be polite and upfront with a question such as "Hi xxxxx, I am a little tight for cash right now, can I come and collect my payment?"

You are requesting requesting politely. Never as "Can i get paid please?" - you open up a door way for you client to make excuses. Being upfront places them on the spot, which requires commitment from them.

[Blurock]

I also use to fear asking my customers for payment, but as time passes, the fear goes. Everyone knows you need money to operate. Overcome this fear, and be polite and upfront with a question such as "Hi xxxxx, I am a little tight for cash right now, can I come and collect my payment?"

Never fear to collect YOUR money. Remember that the debtor owes you, not the other way round.

Tips for collections: Never be rude, always be professional and business like. If it is a difficult customer, speak directly to the owner. Get a commitment, even if it is not for the full amount.

Find out who the creditor's clerk is. About a week before the due date, phone and confirm that they have received the statement and that there are no queries. Some people tend to wait until month end before raising queries. You then end up waiting another month to get paid.

Make sure that your paper work is in order; delivery notes, invoices, statements etc. Quantities and amounts must be as agreed as queries only delays the process and gives the debtor an opportunity to divert the conversation from him not paying, to you not performing. That is why good admin staff are precious!

Business is about relationships. Maintain good relations with your customers so that any problems may be discussed openly. You do not want unpleasant surprises. By visiting customers on a regular basis, you can also gauge whether stock is moving (sales) or not (problems). By networking in your business community you can also get a good feel for where businesses are and how they are performing.

I am sure our members may be able to quote many best practices that we can learn from.

[ThreePeaks]

Blurock, you offer very solid advise the entire way through this thread.

If you find that you are still battling with cash flow problems perhaps its time to outsource to a professional.
Three Peaks offers personalised cash flow management solutions for small business owners.