Across countries, sectors and industries, there are some universal challenges that all small businesses face.
This is because starting a business is difficult, no matter how much business experience you have. Time, resources and cash flow – and frequently the lack of all of these – are just some of the challenges with which small businesses have to contend.
According to Forbes, nine out of 10 start-ups will fail. In 2014, The Telegraph reported that half will go under in their first five years. The challenge faced by small businesses are unique and must be managed properly to keep the business afloat.
There is no one-size-fits-all solution. Different strategies work for different companies at different times. What works for a business one year may not work the next.
There are, however, some common issues that all SMEs must carefully monitor, especially in the first few years.
- Managing cash flow
Before profit can even be considered, every small business must learn to effectively manage its cash flow. Without cash on hand, there’s no fund to cover overheads, remunerate clients and pay staff salaries and without these things, there is no business. Even if money is coming into your business, the key to staying solvent is a strong and steady cash flow.
- Time management
As a SME that is just starting out, it’s likely you will be a one-man band or have only a handful of other on board. This means you must make time to cover all aspects of your business yourself; everything from the basic requirements of your service, dealing with customers, marketing, PR, admin and IT. Even if you are a dab-hand at all of the above (and few people are) working out how long to spend on each area to get maximum return is tough. It is not unusual for small businesses to spend far too long on one aspect to the detriment of the others.
- Learning as you goUnlike in big corporations where tried and tested strategy is already in place, one of the unique challenges faced by small businesses and start-ups is that they must learn as they go. Instituting processes is hit and miss, and what works for one company won’t work for another. Creating structure and sticking to it (there is no HR to pull you up on lapses, after all) is a challenge for small businesses of all sizes.
- Hiring the right peopleManageable growth is a good indicator of success and hiring your first employee feels good. The challenge faced by small businesses is not simply about hiring more employees, but the right employees. Not only must your new hire be competent in their role, they must integrate well into your small team and not be afraid to pitch in when and where needed. It is important that your employee’s work ethic matches your own. Hiring the wrong person can be costly for small businesses but get it right and you will have loyal, enthusiastic staff who will grow with your business.
- Balancing long and short-term goals
When you are small, it is all too easy to become fixated with short-term, day-to-day goals, especially if they are crucial for sustaining cash flow and growth. Equally, focusing on long-term goals can feel like a waste of valuable time and resources when they are already in short supply. Finding the balance between the two is one of the particular challenges faced by small businesses, especially in the first year. Yet it is important to keep one eye on the future. Regular financial forecasting and staying on top of emerging market trends is key. Celebrating small wins will help along the way.
- Learning to switch off
Anyone who has started their own business will have felt tempted to spend every waking hour attending to its needs. Hard work equates to success…right? Actually, it is just as important for entrepreneurs and small business owners take time out to recharge and pursue different creative interests. Thinking can become cyclical and staid if it never deviates from the challenges of your business. Getting enough sleep, eating well and taking regular exercise will help you to focus and have a more positive impact.