In the initial stages of starting a business, there are many challenges small businesses face. While some of these challenges can be easily overcome, others are quite difficult to deal with. The United States Bureau of Labor Statistics states that one in every five businesses fail within the first year. Furthermore, by the end of the fifth year, 50% of businesses fail. Also, by the end of the tenth year, 80% of businesses close down.
In this article, you will learn about the major challenges small businesses face during their initial stages. This article will discuss in detail the challenges and the causes leading to such challenges. Apart from that, you will also learn quick solutions to such challenges and some best practices that will be beneficial for your business. Hence, to learn more, read on through to the end of the article.
Challenges Small Businesses Face: A General Overview
According to Investopedia,
“Starting a business is a significant achievement for many entrepreneurs, but maintaining one is the larger challenge. There are many common challenges every business faces, whether they are large or small. These include hiring the right people, building a brand, developing a customer base, and so on. However, some are strictly small business problems, ones most large companies grew out of long ago.”
As small business owners start a new business, they come against a plethora of challenges. As a result, this affects the survival rates of businesses in the United States. However, there are some business challenges that businesses can fix with a little effort. On the other hand, there are some problems that require long-term effort and patience.
There are times you (as a small business owner) need to take a step back and assess your challenges. Furthermore, you will need to evaluate your pain points and strategize accordingly. For example, in case of financial challenges, you can strategize to receive small business financing. In other cases, you can create strategies or plan accordingly to receive various grants for small businesses.
While no one can guarantee the success of a business, having the right plan and preparation can help you deal with sudden business challenges. However, having the right idea of the challenges before can help you stay aware of them. If you start your business by not having good knowledge of general business challenges, it will be hard for you to maintain the continuity of your business.
What Are The Top Challenges Small Businesses Face?
HubSpot.com explains –
“With those survival rates, it’s easy to see why folks face the first few years of business with trepidation. But, many common business problems and challenges are actually fixable. Many times, you’ll find you need to take a step back, assess your pain points, and rethink your strategy.”
Hence, it is essential to be fully aware of the major challenges small businesses face in their initial years. The following are some of the biggest challenges that small businesses come across, especially in their early years:
1. Lack Of Cash Flow
A lack of cash flow is one of the major concerns for a business, especially if it is a small one. When the cash flow of your business is unpredictable, it will be difficult for the business to meet even its basic requirements. In such cases, businesses even struggle to pay vendors and employees.
As a result, there are increased costs due to lack of finances, late fees, and financial pressures. Furthermore, the business also receives less confidence from existing investors and customers. Hence, the business faces the risk of failure and closure.
To deal with a lack of cash flow in your business, here’s what you need to do:
- Start tracking your business income and expenses
- Create a forecast to predict your cash flow
- Start offering discounts for early payments and review various terms of payments
- Look for new streams of revenue
- Look for small business loans and external financing options
- Try to maintain good relationships with your lenders and vendors
2. Finding Customers
Not just small businesses, even the big ones, work really hard to find new customers for their businesses. However, for small businesses, the struggle is more hardcore. This is because small businesses are not popular, and they also do not know which channel to prioritize. Furthermore, the acquisition costs for businesses are also quite high. This is because small businesses cannot spend as much as large businesses.
According to HubSpot,
“In fact, the cost of acquiring new customers has increased almost 60% over the past six years. If this is something you’re struggling with, you’re not alone: 49% of companies report that customer acquisition is their primary marketing objective.”
The following are some of the ways through which you can find new customers:
- Find out who your ideal customers are through research.
- Use the power of your existing network (like family, friends, colleagues, etc.).
- Start creating a strong presence on various online platforms.
- Include your customers in a referral program.
- Start utilizing content marketing and create valuable content for your websites.
- Focus on offering top-notch customer service.
3. Disruption In Supply Chains
According to SmallBizTrends,
“Small business owners rely on their supply chain to keep their businesses running smoothly. When disruption occurs, it can be extremely damaging. Supply chain issues can result in delays in the delivery of goods, missed customer orders, and lost sales. It can also lead to higher costs for sourcing new materials or servicing customers.”
As a result, it can significantly impact the bottom line of your business. Hence, your business might have to deal with layoffs, lower profits, loss, or even bankruptcy.
The following are some of the major steps you can take to deal with supply chain disruptions:
- Create a contingency plan by properly identifying various supply chain risks.
- Consider diversifying your supplier base and not rely on only one supplier.
- Start investing in inventory management software systems.
- Ensure there is open communication with your customers and your suppliers.
- Make sure your business stays fully transparent with your customers.
4. Lack Of Brand Awareness
Brand awareness is one of the most important aspects of your business, as it helps your target customers know who you are. According to various statistics, most brand managers are of the opinion that every business must focus on building its audience. This will ensure higher sales for the business. Hence, for most marketers, running marketing campaigns is the primary goal.
Furthermore, if you build brand awareness for your business, it will also help your customers trust your business. Also, this will help them associate with your products and services. As a result, those factors combined will help you drive sales and build a loyal customer base.
Here are a few things you can do to increase brand awareness for your business:
- Start using social media and engage customers on various social media platforms
- Continue publishing informative content for your website and social media.
- Continue networking with your customers and your business partners.
- Start offering referral programs and offer incentives to customers for referrals.
- Create branded merchandise to increase brand visibility.
- Make use of various advertising platforms to run targeted advertisements.
5. Lead Generation
Your sales team will stay happy if your business generates enough leads. However, most small businesses face the problem of lead generation. Furthermore, for most marketers, lead generation is a top priority. Hence, it is important to generate both high-quality and high-quantity leads. The goal should be to provide a steady stream of sales prospects for your business.
Here are some steps you must take to enhance lead generation:
- Focus more on content marketing by offering blogs and content and hosting webinars.
- Start doing SEO for your website and become more visible on search engines.
- Build your brand on social media and start engaging in posts.
- Nurture leads through email marketing.
- Start showcasing positive reviews on your website and other platforms.
- Integrate chatbots on your website to provide instant support to your customers.
6. Customer Experience
All businesses strive to improve customer experience as they grow. As customers receive positive service experiences, they get influenced to make more purchases. Also, repeat customers spend more in most cases. Furthermore, you can also generate word-of-mouth marketing, thereby ensuring the free acquisition of customers. However, a lack of satisfied employees or a lack of capital can make it difficult.
Here are a few things you can do to improve the customer experience for your business:
- Understand the needs and demands of your customers.
- Before engaging with your customers, make sure your expectations are established.
- Consider delivering on the expectations to satisfy the needs of your customers.
- Focus on innovating how you enhance customer experience and how much extras you offer to your customers.
- Start measuring how much your customers are getting satisfied.
7. Talent Acquisition
More than half of the small businesses in the United States are of the opinion that labor quality is one of the biggest issues they face. This is really a difficult consideration since a business cannot deal with the rest of the challenges without a top-class team. Here, the business team must understand the aims and goals of the business and work together to meet the targets. Hence, attracting quality candidates is a big struggle for hiring staff.
The following are a few steps you can take to ensure the acquisition of top talents into your business:
- Start showcasing your company culture and values on social media like Instagram and LinkedIn.
- Make sure your employees receive competitive salaries and benefits. Furthermore, focus on providing flexible work schedules.
- Be clear and transparent in job postings by outlining all the job responsibilities and skills.
- Consider utilizing different job-sourcing channels and platforms.
- Create an employee referral program and offer incentives to employees for successful referrals.
8. Workflow Management
Once you have the right people in your team, your next challenge will be managing workflow. Hence, you will need to ensure that your team has the right tools and processes to complete projects. This will ensure high productivity and efficiency for your business. Apart from that, it is also not possible for you to ensure everything is in order. Hence, managing workflow can be a major challenge for business managers.
Here are a few steps you can take in this regard:
- Schedule one-on-one meetings with your direct reports. Also, make sure they carry out meetings with their subordinates.
- Enable employees to fill out employee-satisfaction surveys.
- Ask about various threats and problems employees are facing in their roles.
- Find common problems in the feedback and start working on them.
9. Financial Planning
Small businesses have limited access to resources since there is a lack of capital in the first place. Furthermore, small businesses have very low approval of bank loans. Hence, small business financial planning gets really difficult in such situations.
Here’s what you can do to ensure proper financial planning for your business:
- Stay absolutely clear about your financial goals.
- Ensure the maintenance of accurate financial records. Use newer tools for financial analysis.
- Use financial data to determine your financial position and create forecasts based on those data.
- Seek professional advice for your finances.
10. Business Scaling
To spur small business growth should always be the goal. However, this does not happen due to the aforementioned challenges. Basically, you will see this problem coming in all areas of your business. To deal with this problem, you will need to stick to the basics and act with whatever you have on your radar at the moment. Try to be realistic with your steps, and take small steps forward to long-term growth.
Final Thoughts
You can see from the article that there are some challenges small businesses face that are hard to deal with. On the other hand, there are certain challenges that a business can deal with fast. Hence, while starting a business, the owner needs to be fully aware of these challenges. This will help the business owner stay prepared and deal with the challenges, as these challenges are unavoidable.
Do you have some suggestions on how to deal with initial challenges for small businesses? Consider sharing your ideas and opinions with us in the comments section below.
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