Top 7 Challenges of Small Business Owners Today

The ultimate goal of every small business owner is to grow their beloved business from startup stage to maturity and probably make a Unicorn out of it, worth at least a billion USD.

But like in many other things, the business environment has its many challenges too, ranging from Startup capital to others like cash flow challenges, having the right strategy, marketing plan, and other things as the right staff.

Estimated reading time: 8 minutes

This article takes a critical look at the top 6 common challenges of small business owners, SME entrepreneurs, and how best to mitigate against or solve them.

Most entrepreneurs go into business with a lot of hope and enthusiasm; but, these, with time, are often met by challenges that ultimately make or mar the business. Below is a list of the top 6 challenges that plague most small and medium-sized business owners.

Challenges of Small Business Owners, Marketing Strategy, business growth challenges

Until you face as much challenge like this, you haven’t faced anything yet… keep moving.

  1. Startup capital
  2. Cash flow
  3. Strategy
  4. Recruitment and Staff Retention
  5. Marketing Strategy
  6. Inadequate Online Presence

Contents

1. Startup Capital: 

The challenge: This is by far the most significant challenge faced by almost every single small business owner out there. Fortunately, it is one that most have also solved, else we may not have lots of small businesses out there. However, to fully appreciate the sources of funds available to you as an entrepreneur, you first must understand the fundamental types of entrepreneurship practised.

The Solution: The solutions to the funding issues faced by entrepreneurs is embedded in the understanding of entrepreneurship itself. There are fundamentally two types of entrepreneurship – The SME (Small and Medium Enterprise) and the IDE (Innovation Driven Enterprise). 

Innovation-driven enterprises (usually large corporations) have access to a large cache of funding sources due to their potentials for a massive return on investments, thus making them magnets for venture capitalists and venture capital firms. 

Small and Medium Enterprises, on the other hand, have only a handful of possible sources of funding because they typically do not show a profit for at least some months after startup, if not a few years. 

Challenges of Small Business Owners

For Small and Medium Business owners, their sources of funding are fundamentally limited to 3 sources, and because each of these sources needs some proof of concept for your planned venture, the amount of money available to you is limited, and most often dependent on your social capital and trust level between the source of fund and the founder(s).

  • Angel investors
  • Banks and other commerce centric finance houses
  • Government

It is therefore of note to say that it is always a good practice to first bootstrap as a small business owner, prove your concept, then move out to secure further funding.

2. Cash Flow Crunch

The challenge: There is no better place where the statement “Cash is king” makes more sense than in running a small business.

Unless your business is backed by some large corporations, deep pocket angel investors, or you had a cache of funds in-store before founding your company, the chances are that you would run into cash flow problems. The flow of cash is to a business, what blood is to humans; without it, we die. Yet many business owners struggle with this challenge.

The embedded video explains a lot about what a cash flow is, and the challenges that lead to a flow crunch.

The Solution: With the explanation given on the significance of maintaining healthy cash flow, it, therefore, means that a business owner must ensure the following:

  • Find ways to ensure that the business brings in more money than it expends
  • Ensure that the company adequately manages such funds
  • Ensure proper budgeting and cashflow forecasting
  • Find ways to develop creditworthiness with your supplies and operate on credits as much as possible
  • Open a line of credit with your bankers
  • Ensure that as a business owner, do not forget about yourself when planning for your business’s financial future

If you lack the necessary know-how to manage money, find someone who does.

ExpertsNG

A crucial point to keep in mind is that you don’t just need money for your business —you must have a plan to manage such money. Do not acquire a loan or spend your own savings without knowing exactly where money needs to be spent, how the return on your investment would be made, and how long it would take. 

3. Strategy

The challenge: Strategy is one important aspect of running a business that most small business owners shy away from. Actually, most small business owners know little to nothing in terms of strategy.

A strategy is a long-term plan that you create for your company to reach the desired, future state you envision. A strategy includes your company’s goals and objectives, the type of products/services that you plan to build, the customers to who you want to sell to and the markets that you serve to make profits. Source: Forbes.com

The Solution: For a new entrant SME to succeed in its chosen market, it must create and execute a sound strategy that puts into consideration a lot of variables, especially factors as explained by Porter’s five forces.

At this stage, it is better to call in the experts than try to play smart and be penny wise but pound foolish. This is not the time for experimentation. It is, instead, the time to set standards and baselines that work.

You need to revisit your mission and vision statements, break them into SMART goals, and get them aligned with your capabilities and realities. After all, what’s a vision statement if you do not align it with your realities.

Once you set your baselines with the right documentation and processes in place, your business would be better placed, and most likely be on a trajectory for success.

4. Recruitment and Staff Retention

The Challenge: Hire Slow Fire Fast is a common word in entrepreneurship. There are, however, a ton of problems associated with those words. From the fear of leaked company secrets to the need to keep off the bad conversations involved with firing an underperforming employer, most business owners struggle with recruitment and staff retention issues.

According to HBR – Many startups hire fast and fire slow. A bias for speed combined with the pressure for high growth drives many leaders to be quick to hire (“We need to fill this role now!”) but slow to remove underperforming employees. To “hire slow, fire fast,” start by being absurdly selective in whom you hire. 

Did you know that it is not the prospective candidates that dread job interviews the most? — it’s entrepreneurs, the business owners.

The Solution: Get it right from your foundation. Even if you did not get it right earlier, it is not too late to get things right. Functional staff is needed for business growth.

You must get an HR unit in place and set the right policies to guide you with your recruitment and staff retention issues.

To get things right, please follow these steps:

  1.  Build a culture: Ask yourself what you want your organization to be known for in terms of its processes and how things get done. Then write it down and envision the people you would want to work for you. Note: The first thing to check while hiring your staff is their attitude. Trust me, nothing positive comes out of anything negative.
  2. Create Organizational Structure: I believe that by now, you must have listed the skills that you need to make up your team. Now sit down and write what you expect of each role in terms of skills and daily work expectations.
  3. Create A Staffing Plan: Note that the employee does not define the role; the role defines the employee. It is, therefore, profound that you identify the roles you want, when you want the roles filled, and the skills you would need on your roles.
  4. Get Essential HR Documents and Forms: It is very important that you get the essential HR documents like the under-listed:
    • Employee handbook
    • Employee job description
    • Process manuals
    • Performance Appraisal documents
    • Staff onboarding documents
    • Employee Management & Recordkeeping documents, etc.

5. Marketing strategy

The challenge:  Most SME type business owners do not have the right marketing skills, yet they hardly have the pockets deep enough to hire top-notch in-house marketing experts. 

The solution: It is always a good idea to outsource the marketing strategy of a small business to experts. The challenge most times is that experts generally are mostly perceived as very expensive. The truth, however, is that what you need at this point in your business is a core marketing plan: a document to outline what marketing activities you will undertake to motivate purchases.

It is not the time to experiment. Give the expert a budget to work with; there are always experts out there that fits your budget, find them.

6. Inadequate Online Presence

These days, online is the current offline. No marketing strategy is complete without a significant level of a ubiquitous online presence. A significant percentage of your marketing and sales campaigns must be done online.

Regardless of a company’s size or the size of its business, customer acquisition is at the centre of it all, and these days, there is no better place to engage with customers than the many online platforms where they now congregate for diverse reasons.

The challenge: The online space is filled with noise. As a business owner, it has become difficult to get your messages through the noise and reach your prospective customers.

The solution:  Your online presence as an individual, a brand, or business, is crucial to your outbound marketing campaigns as it reinforces your brand and what you offer to your target market. 

When it comes to online marketing, Consistency = Engagement, and Engagement = Brand awareness.

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Quick Summary

Prefer the short version? Here is a concise recap of the key ideas in this article.

The Solution: With the explanation given on the significance of maintaining healthy cash flow, it, therefore, means that a business owner must ensure the following: Find ways to ensure that the business brings in more money than it expendsEnsure that the company adequately manages such fundsEnsure proper budgeting and cashflow forecastingFind ways to develop creditworthiness with your supplies and operate on credits as much as possibleOpen a line of credit with your bankersEnsure that as a business owner, do not forget about yourself when planning for your business's financial future If you lack the necessary know-how to manage money, find someone.

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