Growing a small business into a profitable entity isn't easy. But why? Here are the top 7 small businesses challenges most entrepreneurs face.
According to the Startup Genome Report, 90% of startups fail within the first 3 years due to small business challenges. Maintaining growth is a challenge for many businesses due to the many factors that influence the success of the business. When you get started, it sounds easy: All you have to do is start small, think big, and scale fast.
However, the reality is that growing a small business into a profitable entity isn't easy. But why? Here are the top 7 small businesses challenges most entrepreneurs face.
Top 8 Small Business Challenges Entrepreneurs Face
The face and pace of business are quickly evolving these days. Therefore, to remain in business, you will have to keep up with the changes.
You also need to have a keen eye to quickly recognize opportunities and also to notice the risks and take action to avoid or mitigate them. These are the top challenges for small businesses:
1. Lack of Technical Support
We live in a digital world in which almost everything is just a click away! As a business, you cannot afford to have your site experience downtime, especially if you are in e-commerce or if you have an online business. This shall result in lost sales.
You also need a secure platform to keep your data private and enable your clients to transact securely. To stay in business, you can consider looking for IT support for small businesses.
2. Getting the Right Team
A small business requires the right team to make the dream work. Many applicants may be after a paycheck and may lack the passion to make the business grow.
The customers are important to your business. However, the most important people in your company are your staff. Hire right, treat them right, and you may realize a growth in your business. Share your vision with them and you will possibly achieve it together.
3. Client Dependence
Bagging a client is a big achievement for small businesses. This means that someone has believed in your ability and capacity to deliver- and also agrees to your rates!
However, you should not fully depend on one client to run your business as it's equated to being an independent contractor. You ought to diversify your streams of income to make it big in business.
Having a single client is risky but having a number of clients is rewarding and the risk of going out of business is minimal.
4. Competition
Competition is usually healthy but unfortunately in some cases as it may result in driving a company out of business. A competitive market in which businesses offer similar services or products is often characterized by price wars. A competitor may entice customers with great deals, and they may possibly opt to move to the competitor.
An example of this has been acted out in the pricing war between Uber and Lyft, who both provide transport solutions. Therefore, you will need to have a competitive advantage over others and use this to attract and retain clients.
In addition to this, getting customer feedback will also be essential to enable you to understand your customer's needs and how best you can meet them.
5. Money Management
The main purpose of engaging in business is to create profits. However, money management is among the main problems faced by small businesses.
Getting funds is a challenge and so is managing funds. You will be required to know the business well and how money is made and used. You should also pay your service providers and your team, while also aiming to break even and make profits within the shortest period.
As soon as money starts coming into the business and to you, you ought to practice financial discipline and ensure that you have good cash flows and a cash reserve.
6. Growth vs Quality
Among the top challenges for small businesses is deciding where they need to focus on: the growth of the business or increasing the quality of services provided.
It is a tricky balance because growth is more than welcome but the quality should not be compromised to maintain the existing clients. This is often the case when there is an unexpected boom in business.
Therefore, you will need to set up good systems in anticipation to meet the growing demand while still maintaining a high level of quality.
7. The Economy
Businesses face challenges while operating in a tough economy. A poor economy which does not provide a conducive environment to do business is among the problems facing small businesses. The businesses that succeed in such an economy are those that are willing to thrive and survive.
You also have the option of getting an SBA 504 loan in case you are investing in commercial equipment or property. Such a loan will secure you against the uncertain economic conditions by protecting you against the rising rates and keeping your overall finance costs low.
This results in you getting the most from tax rates.
8. Tax Compliance
Handling a business can be quite taxing. You need to make profits and still be able to file taxes. You may be doing a home-based business and the book-keeping may take up a chunk of your time.
However, you will be lucky enough to apply home office deductions to keep profits high. Also, cash accounting is allowed in case your business makes less than $5 million.
Read More to Understand Small Business Challenges
Good readers make good leaders. If you are serious, you need to read more on small business challenges. To lead your small business to grow into a big business, you need to stay knowledgeable to be able to make informed decisions and spur the growth of your company.
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