The world of entrepreneurship is fraught with myriad challenges. Whereas every single business has to handle several stumbling blocks, the nature of such troubles is significantly different between an SMB and a large-scale company. For the latter, most of the challenges usually hinge on establishing a new brand or staying ahead in the league and making their business an immensely profitable one. But for a small-sized company, especially in the early phase of its growth, the entrepreneurs have to address other unique challenges.
Should you a novice yet notably aspiring entrepreneur, let’s take a look at our pick for the most common small business challenges as well as their proposed solutions to fast track your journey towards success.
Before diving into the specific ones, it’s important to first cast a glance over the tough picture of small-business world.
Small Business Survival Rate
Based on the Bureau of Labor Statistics’ Business Employment Dynamics, here’s what the survival rate looks like:
- Abound 80% of small businesses with employees will survive their first year in business. (The most recent data reveals that, of the small businesses that opened in March 2016, 79.8% made it to March 2017.)
- About 70% of businesses with employees will survive their second year in business. (The recent data reveals that of the small businesses that opened in March of 2015, 69.2% made it to March of 2017.)
- About 50% of businesses with employees will survive their fifth year in business. (Data point out that of the small businesses that opened in March of 2012, 50.2% made it to March of 2017.)
- About 30% of businesses will survive their 10th year in business. (it’s statistically shown that of the small businesses that opened in March of 2007, 33% made it to March of 2017.)
After all, what you should consider is that: Around 20% of small businesses fail by the end of their first year. By the end of their fifth year, 50% go under; and that number rises to whoppingly 80% by the tenth year.
With failure rates like that, it is completely understandable that folks face the first few years of business with trepidation. And of course, you’re utterly reasonable to feel nervous. But, don’t let these figures scare you out of your dream!
Rather, it’s helpful to actually know what percentage of small businesses fail as this means there still exist several businesses which do succeed. And you are going to be among those successful ones if you’re truly ready and perfectly prepared for all forthcoming challenges. So, let’s get started!
Small Business Challenges Every Entrepreneur Struggles With
Though there remain numberless concerns for small business owners like you, here are the most critical ones that you will “expect” to work on.
#1. Financial Management
Different from resource-based corporations which are often backed by other companies or by incredibly wealthy individuals, small businesses don’t usually have the advantage of starting out with a lot of funds. Unless you began your business with the intention of bankrupting yourself, it’s a “must” that you take some critical steps to handle your business’s money. Whereas managing financial resources is only one of the challenges faced by small businesses, it’s undoubtedly the most crucial challenge when getting your company off the ground.
So, when it comes to initial funding for your small business, what should you do? Here are some handy options which are worth your consideration.
Adopt the simple principle – don’t attempt to start your company until you’ve saved enough money to fund it. This is the ideal situation: no loan means no interest, and no interest means less loss if things don’t work out. No matter how desirable this is, it doesn’t seem to be a realistic goal most of the time.
How are you supposed to support yourself while also saving enough to operate a business, especially if you are still a young and novice entrepreneur? Life is expensive. Of course, you can always live in your parents’ basement and save until you’re 35 . . . or you can check out the other alternatives.
- Bank loan application
The great edge of this option is that there may be some flexibility in how long you have to repay the loan, depending on how much money you borrow.
So, what about its downfalls? Besides the fact that bank loans usually have higher interest rates than some other options, you’re required to earn a good credit rating for any bank to approve you for a large business loan. Plus, the process of applying for a bank loan can be quite lengthy. Whereas bank loans are definitely worth considering, it’s a smart move to check out all your needs and options before committing to anything.
- Online lending site
When it comes to seeking an online lending platform, it’s at your best to choose one which is not only highly prestigious but also well-designed for small businesses. Among numerous lending sites available, Kabbage may be your perfect match.
The most appealing feature of using Kabbage is its speed: within a few days of applying online, you may very well have your funds in hand. Furthermore, Kabbage boasts a relatively low-interest rate. Once you’re planning to borrow from such an online lending site, bear in mind that its repayment period is often shorter compared to the traditional bank loan. Thereby, let’s be 100% sure that your business plan will allow you to earn enough to pay back the loan on time.
Another financial challenge small business usually face is that these companies don’t tend to show a profit in the early stage of their growth or for at least a few months after start-up. When planning for your business’s financial future, don’t ever forget about yourself: you have to live, which means living off savings for a while if you don’t have any other source of income.
Last, but certainly not least, bear in mind is that you don’t just need money— you need a proper money management strategy. Even before you acquire a loan or spend your own savings, plan carefully where and how money needs to be spent. If this task is too overwhelming to handle on your own, it’s alright that you find someone. There are multi-talented individuals that can create budgets, calculate VAT or generate online invoices, which most likely let you feel strategized and relaxed.
#2. Establishment of Your Customer Base
Customer acquisition is problematic math for every single business, especially in our modern era of constantly changing consumer tastes and ever-evolving business landscape. Even the biggest, most successful firms have people working hard every single day to find new customers. And there are not any exceptions for such giant names like Apple, Toyota or McDonald’s.
For small businesses that aren’t already a household name, attracting customers can be particularly difficult. Given so many channels you can choose to focus on, how do you know what to prioritize and where to allocate resources?
Let’s hit the ground running with these simple yet super powerful tactics of customer acquisition:
- Never underestimate the power of a local customer base. If you’re based in a small community, it’s great to take advantage of the local camaraderie and culture. Also, you will be better off looking into other local businesses and advertising opportunities to see if there are places for the goods or services you provide.
- Create and market to your target buyer personas. The very basic principle in business is that don’t try to sell your product or service to everyone—you’ll undoubtedly fail. Think very carefully about who would benefit from your business and map out an in-depth marketing plan targeting those people.
- Don’t ever neglect your online presence! Even if you aren’t an online company, establishing a solid online presence with your website and social media pages needs to be stellar.
One of the challenges faced by small businesses is building up enough of a web presence to be discoverable on search engines – a goal worth achieving. Crafting compelling content marketing and adopting search engine optimization (SEO) stand out amongst the best ways to do that. In practice, these pieces of knowledge will also guide you on how to attract customers by following through with leads as they make their way through the sales funnel.
#3. Customer Retention
There are not going to be fewer stumbling blocks once you already build up your brand awareness and have your own customers. In such a competitive world, keeping customers you already have proves to be a great challenge, especially when it comes to competing with other large corporations with resource-based strategies and well-rounded marketing plans.
Should your business fall in such a competitive situation, keep in mind that personal touch is a firm-specific advantage you can emphasize on.
Customer service is the backbone of your business’s success. Be 200% sure that your customer service is flawless: to follow up with people after conversion and ascertain that all unsatisfied customers are directly—and politely—addressed. No matter how simple this strategy seems to be, being known as a nice company can go a long way!
Understandably, people love feeling that their concerns are being heard and well addressed. Let’s treat your customers and site visitors – your “would-be” customers – like the humans you know they are and let them get to know the faces and voices behind your company’s operations. Furthermore, every single person enjoys being “special”, thus, make your best efforts to understand their real intent and deliver personalized experiences, which are tailored just for them.
What’s more, whatever approach you’ve decided to take with your company, make sure to stick to your brand consistently throughout your marketing material and web copy. Being a small business will sometimes work against you, but when it comes to your brand’s personality, size shouldn’t matter.
#4. Concern for Scale Expansion
One of the small business challenges that are rarely paid adequate attention to is the huge adjustment needed to expand your company. As you’re starting out, you’ll be able to head to the most major areas of your business. Nevertheless, when your small business starts to grow, there is a likelihood that you have to relinquish some of your earlier control. Rather than managing every single task, you will delegate workload and be more of a supervisor for the whole operation. The concern of how to assign the work volume to specific individuals in the most efficient way for your business turns out to be a major one.
To address such a concern, let’s cast a glance over these practices.
- It’s of utter importance to be truly attentive to the expertise and skills of each of your higher-level employees. Question yourself some basic questions like: What do they excel at? How much do you trust their judgment?
- Additionally, let’s grant your employees opportunities to make their own decisions, letting them make up their own mind and see how things go. It’s a “should” that you start them off with some smaller-scale projects in which you will supervise rather than micromanage each assignment. How will your employees ever be able to show you what they’re capable of if they aren’t given the opportunity to do so?
- Under no circumstances should you neglect the significance of creating a supportive work environment for your employees. Start off performing some research about things like work-life balance, flexible schedules, and office culture.
Though these kinds of stuff seem to be of little practical value in terms of real profit, it does act as a prerequisite for your business development since you create incentives for them to grow and fulfill their potentials. If your employees feel valued, they will not only work harder but also be less likely to leave your company for another.
The Bottom Lines
The winner is not the person who always succeeds, but the one who finds the right cure for all the hindrances that come on the way. Let’s consider these critical small business challenges as well as their proposed course of action as a roadmap for you towards the position of a real winner.