Small businesses have the most to lose, which is obviously related to the nature of their very stature. It is so difficult to make one’s mark in any field today, in spite of so many opportunities being there to do so.
The problem is that while there is a massive opportunity today for small businesses, the competition is perhaps even more massive! That however, has never stopped anyone with a good business head on their shoulders from being successful.
The reasons that have stopped budding entrepreneurs from ever really getting past that “budding” stage, however, are almost always financial.
What Are the Specific Financial Reasons Why Small Businesses Fail?
Financial issues are pretty much almost always found to be a direct or indirect reason why so many small businesses fail every year in the US and abroad. Do keep in mind that it’s a myth that most small businesses fail, but there’s truth to the fact that a significant number of them do end up going bankrupt.
Taking a look at those financial reasons which bring about their tragic falls will help us both understand and avoid those problems intelligently. It’s the first step of our risk assessment strategy here.
Financial Issues are Often Interrelated and Chain Linked
As you may or may not have noticed, many of the problems here are interrelated, which is quite a significant observation for very practical reasons.
It has been found that businesses don’t generally fail on account of just one or two mistakes, although that is known to happen. For a large majority of the SMEs which do not make it, the financial reasons are often not just multiple, but interrelated as well.
The following should serve as a good example to explain how it often plays out in a chain-linked fashion:
This hypothetical scenario is quite common, unfortunately, and it’s just one of the many possibilities. Therefore, in order to avoid a domino effect, we need to be careful with our risk assessment and financial management from the very first day of the planning stage.
Now that certain major financial threats and mistakes have been identified to some degree, it is time to assign the necessary solutions and steps that begin with common business sense but go far beyond that.
Hire a Financial Expert or Get Your Own Degree
As illustrated in our hypothetical scenario, the whole problem arose from a singular problem, which can be identified as lacking a money management expert who needed to be there right from the planning stages.
If there was a financial expert involved or the entrepreneur had his/her own MSF degree to rely on, it would be possible to avoid all of the problematic scenarios quite effectively. Sometimes it can be worth outsourcing small business accounting for this exact reason, as it will help you save money in the long run.
Therefore, the most important step is obvious, and it can be taken by either hiring financial experts from the planning stage, or by getting your own MSF degree. The latter option would be perfect for entrepreneurs who:
Not only does it significantly increase the chances of success by eliminating some of the most common reasons for startup failure, but the degree also opens up a whole new avenue of lucrative career opportunities.
To provide some context regarding the kind of job opportunities we are discussing here, consider the average yearly pay for CPA and FRM professionals in the US.
As you can see, there is a reason why small business owners often cannot afford to hire them!
Which Path is Right for You: FRM vs CFA
Suffolk University’s official website provides clarification regarding the whole FRM vs CFA confusion, and it provides all the necessary details regarding how their Master’s in Finance (MSF) program can help students get started on the path to attain either of the two highly coveted designations.
If becoming an entrepreneur with sound knowledge about business financials is your prime objective though, the MSF program alone is sufficient for that part.
It will teach you to expertly handle most of the usual financial problems that small businesses are often faced with. However, if you wish to sit for CFA or FRM exams to facilitate career growth, visit the aforementioned website to know more.
The Basics of Smart Financial Management
Common knowledge is not as common as it should be, but the following few examples should help small business owners manage their general finances with greater efficiency than most:
This was a brief discussion created with a simple approach, mainly in order to help SMEs avoid making major financial errors and to direct them towards financially sustainable business management.
While knowing these outlines will help for sure, adequate actions and steps as suggested will also need to be implemented before the problems actually begin to pop up, one after the other.
Preventive measures are key here because, as already mentioned, small businesses have the most to lose. You may not be able to prevent toppling over if the precautions are not in place to prevent that domino effect from spiraling towards the road to bankruptcy.
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