How Can SMEs Overcome Their Biggest Challenges
Whether a new start-up or an established small enterprise, all SMEs face some critical challenges while trying to sustain in the competitive business space. Regardless of the industry you want to establish your business in; every self-starter agrees that the process is hard, especially at the early stage.
In fact, as per the U.S. Bureau of Labour Statistics, around 20% of all small-scale businesses fail to sustain by the end of their first year. The same source stated that by the end of the fifth year, around 50% of these businesses go under. Accordingly, it is in the best interest of SME owners to identify the most prominent small business challenges and ways to overcome them.
Here’s more on the subject.
Finding Right Customers
One of the most crucial problems that SMEs face is finding the right customers. Indeed, retaining customers is a critical concern for large scale businesses as well. However, the problem is even more challenging for SMEs due to the lack of brand recognition among the target customers. Furthermore, the cost of acquisition channels is also significantly high for small scale businesses as they lack the spending power that most large-scale businesses have.
Solution: Entrepreneurs of small-scale businesses must craft specific ideas about which customers they should target. Accordingly, they should customise templates to create an adequate representation of the targeted customers. Also, business owners must create quality content to target specific demographics and share them in chosen channels.
Finding The Right Team
Due to the limited budget, SMEs also face difficulty finding the right talent to form a great team and seamlessly manage operational aspects such as sales, marketing, and production. Inability to secure the right team leads to an imbalance in workload management and consequently impacts the core business strategies.
Solution: To eliminate this issue and choose the right team, you must first focus on the task you wish to assign to the candidates. You must streamline the hiring process, set a schedule and search for talent on popular job platforms. Also, it is always wise to hire candidates on a contractual basis initially to see whether they are fit to fill the requirement of the position.
Limited Financial Source For Their Business
Small businesses also face major challenges in accessing funds and maintaining cash flow which is among the biggest impediments in ensuring sustainability in the competitive market. While business credit is one of the most recognised ways of mitigating a cash-flow crunch, there are other ways in which you can secure a substantial amount of credit to manage working capital.
Solution: You can opt for alternative financing solutions such as invoice discounting from reliable fintech companies like KredX and address working capital needs effectively. By leveraging your unpaid invoices as collateral, you can access a percentage of receivables as credit. The received amount can be utilised for business expansion and growth.
Difficulty In Maintaining Profitability
Maintaining profitability is one of the most significant small business challenges that SMEs have to consider at the start of the business.
Solution: In order to improve the profitability of your business, there are 3 things that you can do:
- Reduce operational cost
- Increase the turnover
- Increasing productivity
While it is difficult for businesses to control all types of market challenges that affect revenue, some effective ways can help increase and maintain revenue.
Solution: SMEs must consider adjusting their pricing strategy if they are facing fierce market competition. Also, while bringing any changes in the price, they should implement it gradually as any drastic increase in price can create a negative customer reaction.
Establishing A Digital Presence
For any small-scale business establishing brand recognition digitally is one of the most serious challenges. Therefore, small scale business owners must have a goal to run extensive marketing campaigns on online channels to get a strong foothold in the market. This will help to build brand awareness and edge over the immediate competitors.
Solution: Some effective ways of establishing in digital presence are:
- Focus on PR management
- Consider Co-marketing
- Running consistent and high-quality blogs
Fail To Identify Key Performance Indicators
Research has shown that identifying Key Performance Indicators (KPI) proves to be one of the major challenges for SMEs. Most small-scale businesses start by evaluating the sales revenue and profit every month. However, the process is extremely time consuming and requires a number of trials to identify the key metrics and what works for a business.
Solution: Small businesses can frame some parameters and use them as indicators for business activities like:
- Business goals and objectives
- Current business stage
- Tools used to track your KPIs
All self-starters undoubtedly agree on the fact that starting a business and maintaining sustainability is extremely hard in a highly competitive SME landscape. On top of that, persistent small business challenges can further deter the growth and quality of business operations. To overcome such challenges, businesses should become well-versed with the probable challenges and implement timely solutions to keep cash flow and operations smooth and uninterrupted.