Strategies To Overcome Financial Challenges In Business Growth
Financial stress is a common reality for growing businesses. Fluctuating economic trends, rising expenses, inflation and interest rates can leave you feeling overwhelmed during the expansion process.
Financial challenges can be tough to deal with, but it’s possible to get through them. By handling debt properly, setting goals and cutting unnecessary payments.
This article discusses how to overcome financial challenges to reach your business goals:
1. Tackle Debts Through The Snowball Method
Business owners can plan ahead to avoid financial challenges, but circumstances change when you least expect it. Business expansion generally requires spending money and exceeding your monthly budget can potentially lead to debt.
Debt stops you from saving money and remains a source of stress if uncontrolled.
The snowball method could be a good way to avoid increasing your debt and overcome financial challenges, with steps that can work for any business. It goes as follows.
- Identify the smallest of your debts
- Save money and pay off that debt as soon as possible
- Take the money you put toward paying off that debt and save it for the second-smallest debt
- Continue to pay off each debt according to size using the saved money
Since some months give a more stable income than others, it’s good to start saving before financial difficulties get in the way of success.
Next, you can set savings goals to overcome financial challenges and stay within your budget.
2. Set Stringent Financial Goals
Having extra money put aside can feel more like a luxury nowadays. Financial challenges can come from the following sources.
- Late fees
- Impulse purchases
- Car repairs
- Car payment
- Living expenses
- Paying bills
- Credit card debt
In the worst cases, many tend to work overtime or get a second job for extra income to overcome financial challenges. However, those aren’t always possible for everyone.
Money stress can distract us from being able to re-evaluate our spending habits, so it’s crucial to create goals to help reduce expenses.
More than keeping a budget, these goals can motivate you to increase your savings and earn more income.
Think of the long-term goals you want for your business and the financial challenges you may face as you grow your income.
Look into the common source of the money problems and ask yourself the following questions.
- Do I need to keep spending on this?
- Is it still necessary with my budget?
- What are the alternatives to this expense?
- Is this helping me to achieve my business goals?
Often, the underlying issue is unnecessary expenses. To overcome financial challenges, setting goals to lessen spending could help you save more.
Next, let’s discuss keeping your credit card spending in check.
3. Work Towards Eliminating Credit Card Debt
A credit card can lead to financial concerns, especially with excessive discretionary expenditures. If your net income can’t make up for your bills, your business credit card balance may be the issue.
Here are a few ways to stop dealing with credit card debt and overcome financial challenges.
- Check for minimum payments: Credit cards have a monthly minimum payment that can snowball into more debt. Note down the minimum payment for your card and how long it would take to pay off your balance.
- Consolidating debt: Paying your loans through different sources is usually harder to track. Put them all into one payment method so you can pay in one go.
- Automate payments: Use automatic payments to handle your credit card bills.
- Track expenses: Know where most of your budget goes. Create a list of all your expenses and check which ones you can do without until your finances are stable.
- Consider external help: Many resources, like moneysmart, can potentially offer strategies for reducing debt.
Putting these methods together can possibly help increase your savings and give you a better hold of your finances.
Next, let’s discuss having an emergency backup fund for challenging times.
4. Set Up An Emergency Fund
Money challenges can happen to a business of any size. An emergency fund can help you navigate these periods.
Make sure to keep depositing into a savings account that your business can tap into, and spend wisely.
5. Identify Current Spending Patterns
One way to plan ahead is to know where you spend money the most. If you are paying for things that aren’t necessary for your business and daily needs, it might be time to end that habit.
A monthly budget won’t help much if you don’t consider these patterns, so remember to take note of these habits and see if you can have cheaper alternatives to improve your financial situation.
If you’re having difficulty identifying what you can afford to stop spending on, you can ask a trusted friend or a financial adviser to go over your budget.
Now, if the above methods haven’t helped your financial challenges, then it may be time to take out a loan, if it’s affordable for your business.
6. Take Out A Loan If Necessary
There are many loan options available with competitive interest rates and flexible payment periods. However, if you’re experiencing financial stress, a loan can potentially further add to your burden.
Remember that some loans may have stricter repayment terms, so try to look for different lenders and more favourable terms.
At Lumi, our business loans range from $5,000 to $500,000. We also offer bespoke lending options that can be tailored for your business needs.
Finally, you may want to consider if you truly need a loan before applying for one.
7. Stick To A Timeline
Adding a timeline to your goals generally keeps you grounded in reality. It can potentially motivate you to reach these goals within a set period and give you greater control over your business’ finances.
Sticking to a timeline can give you a wider perspective on how to overcome financial challenges.
Keep the timeline realistic, but don’t be afraid to set a very high goal to further motivate growth and success. Add smaller yet more attainable steps towards that main goal and continuously build on them.
Another good addition to your savings goals is checking your business’ insurance plan for employees.
8. Review Any Insurance Premiums
Remember to double-check your insurance plan every year and see what you can adjust with premium plans.
Insurance can help when challenging financial circumstances happen, so it’s typically advisable to keep it, but you may be expending too much on outdated plans or expensive premiums.
Conclusion
Securing your financial future starts with knowing the challenges your business will go through. With careful planning, tracking, and guidance, you can manage any difficulty that comes your way.
Need extra funds to expand your business? Applying for a business loan could help you achieve your business goals, if you can afford it.
