Biggest Challenges Faced by Small Businessess
Every small business is different, even in the same industry. Services, products, and clients all bring with them unique challenges. But most problems small business owners face fall into similar, broad categories.
Knowing which challenges your business could face can help you prepare for handling them. If you’re in the midst of a challenge, simply identifying it can guide the solution.
Failure to Diversify Clients
Ever heard the expression – don’t put all your eggs in one basket? Business owners should take this saying to heart. If 50% of your business comes from one client and their business goes through a rough patch, so will your revenues.
Keep an eye on how much of your revenue comes from each of your clients. Simply divide a client’s revenue by total revenue to get the percentage of your business that they represent. Depending on your overall size, you likely want to keep each client’s contribution to around 20%.
If your calculations reveal that losing a core client would significantly hurt your ability to keep operating, brainstorm marketing ideas to bring in new business. Consider targeting remote clients, or expanding your services.
Money Management
Money management is probably one of the biggest challenges small business owners face. It goes beyond balancing your checkbook. Even if you have a monthly budget, do you track it? Are customers paying their invoices when you expect it, or several days late? You might need to revise your budget accordingly.
Money management includes keeping track of late payments, following up with past due clients, and paying your bills on time. Avoiding late fees and interest charges, and using a line of credit or business credit card wisely, can save you money.
During high-growth, high-income periods, overhead can balloon. Who cares about the cost of catering daily lunches when times are good? But high overhead during a slump or status period can hurt your results. Examine your overhead costs on a regular basis to keep them from ballooning out of control.
Dedicate time on a weekly or monthly basis to take a look at your business’ overall financial health. If you’re seeing a consistent problem with collections, think about processes you could put in place to shrink the number of days past due and amounts past due.
Depending on Key Employees
If one of your employees quit, how would it impact your business? Are they the only one who knows where the copier toner is saved, or that important client spreadsheet? Failing to think about what would happen if someone quit could leave you scrambling.
Sit down with a list of core employees, list out their duties and responsibilities, and then ask how losing one of them would impact your operations. Start with these questions;
- What specialized knowledge of your business or customers does this employee have?
- Do any of my other employees have this knowledge?
- What operational questions would I have if they left? (i.e., who supplies our toner).
- Could another employee fill in for some of this key employee’s duties during the hiring and replacement process?
The answers to these questions could reveal an over-dependence on one employee. Once you’ve identified the potential problem, it’s easy to solve. Ask the key employee to write procedures and document how they do their job. Set up times to have them cross-train other employees.
Communicating and Training
The time you spend onboarding and training new employees supports continued success. It ensures that they’re doing their job properly and representing your business well to clients. But many small business owners fail in this area.
Communicating expectations to both new and current employees can be a challenge for owners. If they’re hiring due to an exigent need, time could be of the essence. Or, you might have grown accustomed to relying on others to train new hires.
At some point, however, a decentralized and informal communication and training strategy could lead to variable quality in customer experience or job performance. At a minimum, you want a written job description that outlines duties and expectations. But larger businesses might also benefit from written policies.
Quality vs. Growth
When expanding, businesses often face a trade-off between quality and growth. They may have built their reputation on high-quality products or great customer service, but as they expand to serve more customers or fulfill more orders…quality slips.
Failing to keep an eye on quality during a growth period could lead to reputation risk, which could, in turn, wipe out all your growth. You might even lose pre-growth customers. Maintaining quality while growing is a common challenge.
If you’re in a growth pattern, or preparing for one, put quality checks in place. Appoint supervisors to perform those quality checks, and scale back on growth if you’re seeing issues. Managing this challenge after-the-fact can be tough – it’s hard to win back disgruntled customers – so try to prevent it from ever becoming an issue.
Marketing while Maintaining Service
Diversifying your customer base reduces your risk, but it also can help maintain your business. Attrition is a natural part of the business cycle – customers move, go out of business, or no longer need your services. Continually marketing to bring in new business can offset naturally losing clients, but you must maintain your service levels to existing clients.
One of the easiest ways to market while maintaining service is to outsource your marketing efforts. Hire a firm to help with SEO or social media management, or to create a cohesive strategy. You can also hire an employee to handle marketing, rather than spreading it amongst employees who are also trying to serve customers.
Every business will encounter one or more of these challenges during its lifespan. Knowing what’s coming, and being prepared, can mitigate their impact.
