Throughout the world, small businesses are dominantly the lifeblood of the economy. In fact, an astonishing 99.9% of businesses are small businesses in the US, and they employ nearly half the American population. However, these businesses encounter many challenges, which is why over 20% of startups fail in their first year, and many more continue to walk on thin ice.
Consequently, as an entrepreneur, you need to know these challenges beforehand if you’re looking to survive. Here are the top small business struggles and how to overcome them.
Small enterprises regularly struggle with financing. Here are some leading factors:
- No loan or high-interest rates by banks for projects considered to be too risky,
- Bad credit score or lack of security to secure loans,
- Low sales and high expenditure,
- No appeal to investors,
- Poor cash flow management.
This then translates to struggles in marketing, advertising, working capital, and inventory purchases. In the long run, your business will likely struggle with general operations. It is, therefore, vital to check on your money management skills to overcome this challenge. For example, avoid excessive spending, pay debts on time, and create an actionable business plan that can attract investors for funding.
Economic cycles are the periods of growth and recession in the economy. Economic cycles are inevitable, and small businesses suffer every consequence that comes with them. For example, during an economic bust, small businesses suffer high-interest rates and low spending power, which leads to reduced cash flow and, consequently, low profits.
What can you do to avoid going out of business in this case?
- Keep up with economic patterns to avoid being caught off-guard,
- Save money in advance,
- Innovate new, creative, and sustainable business ideas,
- Focus on the quality of the most sought-after services in your business,
- Downsize and avoid excessive spending without compromising efficiency,
- Seek help from family, friends, investors, banks, or business partners.
Customer acquisition and retention
After happily launching your startup, you’re hit with the sucker punch of lead generation and customer acquisition. This can be because of high pricing, poor quality of products and services, targeting the wrong audience, and amplified competition. After acquiring customers, you may struggle with a high churn rate and poor customer retention.
- Brand awareness, advertising, and marketing,
- Loyalty programs (offering discounts and coupons),
- Quality products and services,
- Exceptional customer service.
Talent acquisition and retention
Many small businesses are currently grappling with a labor shortage. Acquiring quality talent suffers from barriers such as poor work culture and work-life balance, fewer chances of growth, competitive wages, and bonuses offered by well-established companies. Retaining employees is another struggle you may face due to wage disagreements and unqualified employees, which leads to high employee turnover rates.
- Work on talent branding,
- Train fresh talent and promote them accordingly,
- Make reasonable wage offers to stand a chance against your competitors,
- Create a positive work environment and culture,
- Agree on well-defined responsibilities and roles with employees.
Time is more valuable than money, especially for entrepreneurs. Juggling between operations for long hours is a tiring experience. Also, it is difficult to maintain a healthy work-life balance when running a small business. This can be caused by constraints in the workforce, limited access to time-saving technology, and inadvertent workflow.
- Delegating some duties to other employees,
- Training your staff to upskill and help you in some duties if they are unqualified or inexperienced,
- Developing a concrete work schedule,
- Automating work,
- Taking a rest,
- Cutting off distractions.
Small businesses always compete for market share, but only the best ones get the major share. Businesses face stiff competition due to a lack of added value to the already available products or services and poor pricing.
Here’s what you can do as a business owner to get a competitive advantage over others:
- Product differentiation. This will help your product stand out,
- Innovate and invent products and services that are more efficient,
- Competitive analysis. Check on what your competitors are doing right and emulate that (in moderation),
- Brand awareness, marketing, and advertising,
- Conduct loyalty programs and quality customer service,
- Offer reasonable prices and discounts.
Most small businesses rely on human labor to run. However, with limited finances, small businesses face competition from technological advances like artificial intelligence and high-tech firms that are well-established.
Adapt and adopt. Embrace the shift to AI and technology and leverage automation;
- Start small. Use inexpensive technology,
- Combine technology and human workforce. For example, retain your physical retail shop and create an online shopping app,
- Seek assistance in purchasing technological inventory,
- Partner with other small businesses and share expensive tech property.
Small enterprises regularly get on the wrong side of the taxman. For example, mom-and-pop businesses run by elderly owners are always in danger of tax noncompliance because of a lack of knowledge of tax policies and poor cash flow management.
- Contact a professional with knowledge of tax policies for advice,
- Stay up to date on matters of tax policies and deadlines,
- Beware of scammers. If someone sends you invoices, ignore them because fraudsters usually pose as tax collectors. If you’re wondering who stands behind these invoices, all you need is their full name or phone number. Then visit Nuwber and find out who it is,
- Keep accurate records.
Even though government policies are generally for the benefit of small businesses and consumer protection, sometimes businesses barely survive at the mercy of the government’s policies. For example, expensive licenses, legal requirements, and environmental regulations are agony to small business owners.
However, because these regulations are compulsory, the solution is to learn and understand them to avoid problems. Ask for policy assistance, for example, by consulting the IRS on tax matters. In other scenarios, appealing to redundant policies works as they may get revoked.
Loss of Passion
Sometimes entrepreneurs just run out of the drive to run their businesses. This is caused by consistent failure, financial constraints, burnout, and personal struggles.
- Take some time to rest and re-strategize,
- Ask for financial help,
- Seek professional help on how to run your business,
- Engage more with your co-workers.
Running a small business is not a simple task. There are countless challenges that must be overcome to survive and get a piece of the market share. However, most of the world’s economies are stable thanks to SMEs. Therefore, there’s hope for better days, and with the above solutions, you can rest assured your business will scale to the heights of success.