Entrepreneur financial problems are one of the biggest challenges they face. Usually it’s because they don’t have enough financial resources to accomplish their business goal. This is because a business cannot exist without financial resources, but many businesses don’t have enough to accomplish their growth objectives.
There are several reasons for entrepreneur financial problems, but more often than not I find it arises from one or more of the following things 3.
- No budget
- Focused on the wrong financial objective for their stage of growth
- Don’t know when capital is needed to add capacity
No Budget Causes Entrepreneur Financial Problems
The biggest reason for entrepreneur financial problems is they don’t have a budget. Usually it’s because they don’t understand what a budget is! A budget is a plan. It is HOW you plan to spend money in your business. If you haven’t thought it through before-hand how will you know if you should spend money or not as you go?
As a result most small business don’t have money when they need it to achieve their goal. At the beginning people/ vendors will tell them you need this or you need that. How do they know what YOU need?!!! That’s what a budget is for.
Start a task list of things you must accomplish as you move toward your business goal. These can be general in nature in the beginning and become more specific as you get ready to accomplish them. This becomes your business plan. Now, using this list of tasks estimate what you may have to BUY to complete it. Keep a spreadsheet of these costs and viola you have the beginning of a budget. You can find more about this process in our High Impact Business Planning program.
Focused on the Wrong Financial Objectives
If you have read my post The Search for Growth Continues you know that finance is a major factor in the growth model. Often entrepreneurs are focused on the wrong thing for their stage of growth. For example, they’re trying to get capital for new equipment when they haven’t even proven their business is capable of consistently achieving break even.
Look at the improper focus here. New equipment is usually associated with expanding capacity. Why would you need more capacity if you are not even using the capacity you have to break even yet? This tells me you have another issue either you don’t understand your capacity OR your pricing is way off to begin with. If that is the case then fix these problems FIRST. If you add capacity in this scenario it won’t fix the other problems and you’ll end up with more debt and capacity to sell anyway. So, be sure you are focused on the right objective for your stage of growth so you don’t create more entrepreneur financial problems (see the table).
Growth Stage Financial Objectives & Sources
If you know when you’ll need to add more sales people and how much it will cost you can start saving for it. Add this to your budget.
Most owners don’t know which puts them in scramble mode when the time comes. When you need more sales capacity there are 1,000 other things going on, and if you haven’t properly prepared, when you get here you have to stop everything else in order to handle the financial problem you created. Take a lesson from the Boy Scouts and “Be Prepared!”
Do you face these entrepreneur financial problems in your small business growth? Do they fall into one of these 3 categories? If so, how do you plan to tackle them and keep yourself on a positive track financially?
If your entrepreneur financial problems don’t fall into one of these 3 areas, how would you classify them? These are the one that I typically see, but they are by far not all of them. Share your entrepreneur financial problems here and let’s get a dialogue started so you can focus on growing your business faster.
Not Know When You Need Capital Is a Common Entrepreneur Financial Problem
This is tied to the last entrepreneur financial problem. If your revenue engine is tuned properly then you know when you need to add more marketing, sales, or production capacity. Do you have this level of insight into your operation? If not, a Revenue Engine Performance Checkup is a good place to start. Just click the button below to get $100 off yours.