The Causes of a Small Business Crisis, and Advice on Handling It

No matter how well a small business is doing, it is vitally important to be prepared for crises, which can happen at any moment. Instead of waiting for a crisis to occur and then trying to find a way to handle it, a small business owner should go ahead and be prepared for the possibility of catastrophe so that a plan of action can be implemented immediately.

The Causes

There are many ways that a small business can fall into crisis, and the factors can be as variant as a spectrum of colors.

One of the most common causes of crisis involve the country’s economy. When the economy begins to suffer, the effects on a small business can be detrimental. During the times of a slow economy, a small business has to be prepared for the negative effects on their cash flow with plans on how to compensate for them. It is vital to remember that no business is immune from the effects of a bad economy.

Another type of cause for crisis can be weather or natural effects. This can include such inclement weather as tornadoes, hurricanes, earthquakes, and flooding. This type of crisis can range from disastrous, like a complete loss from a tornado, to destructive, like a damaged roof from a fallen tree.

A third crisis cause has more to do with workflow. Sometimes, a crisis can occur if the business loses certain key characteristics, like a vital employee or a main supplier or sales vendor.

Tips on Facing Crisis

Once you recognize the main causes of small business crisis, you can begin setting forth a proper risk management plan. This way, you will be prepared for even the worst issues that may arise.

Make sure to evaluate any possible cause and then put together a checklist of action. One of the ways to mismanage a crisis is to have no plan, because the crisis is inherently stressful. You need to be able to look toward a plan without having to think of one.

If the lagging economy has caused a crisis, then consider options like sales, boosted advertising, and customer specials.

To be prepared for weather related crisis, it is important to be properly insured. Make sure your business insurance covers even the additional items, like flooding and sewage backup.

Finally, be prepared for loss of employees, vendors, or suppliers, by cross training and by locating backup sources so that you will never find yourself with a large gap in workflow.

If you go ahead and expect that crises may occur, you can create proper options and plans of action so that your small business can weather any storm.

Small business is a privately owned sole proprietorship, corporation or partnership with a few employees and less sales compared with large firms. There are various types of small business such as shop, restaurants, groceries and guest houses. Some small stores can be run by one employee or by the owners for instance, a shop. There are many advantages of owning a small business. To start with, you will become independent and your own boss. Many people quit their job to start their own business where they will be free to make decision on their own. A business can be a part time job and, it can be started with less capital depending with the size and type.

You can easily do your marketing online and also change your business at any given time. There is good intimacy between you and your customers. There are several firms and organizations out there who are ready to offer products and services to small business for example the Self-Help One-Stop Resource. There are various sources of funding to choose from for example, you can get funds from friends and relatives, your savings, banks and grants from private lenders and inviting new investors. However, many small business owners work for many hours. This could lead to bad calculation and loss of money especially if you are an accountant. Some small business usually take many years before they start to generate profit thereby making it difficult to calculate the business profit.

Different businesses require different capital depending with size and type. If you have less capital when starting a particular business, you might end up starting another type of business contrary to your career and this could lead to poor management. Also, without proper knowledge in a different store could lead to foreclosure, wastage of time and money. Sometimes, when a business fails, the owner’s first option is bankruptcy due to frustrations. Bankruptcy should be your last option since you could end up loosing your store which you have worked hard to achieve.  

Having and maintaining your customers is another problem faced by new small businesses. You have to be very keen when delivering services and products to clients. Without customers you can hardly make progress. You should always handle your clients with much care. Whether the business is making profit or not, the employees have to be paid every end of the month. Once you fail to meet your employees demands, they will certainly quit their job leaving your business with no one to run it. Employing new people every now and then will hardly please your customers. In the long run, you will end up loosing your clients to other competing small stores. However, it’s is always good to have extra money to assist your business during hard time.