“A small business is an amazing way to serve and leave an impact on the world you live in.” – Nicole Snow
There are about 400 million small and medium businesses (SMBs) around the world. They are the main source of job creation globally. SMBs account for about 60 to 70% of employment and constitute over 95% of all businesses in the world. In the European Union alone, the small and medium businesses:
- represent approximately 99% of all businesses,
- generate about 85% of total employment, and
- provide two-third of the overall employment in the private sector.
And yet, in the UK about 20% of new businesses fail in their first year. Around 60% go bust within the first three years.
That being said, it is important to analyse WHY small and medium businesses fail. What kind of obstacles do SMBs face that big companies don’t? And how can they overcome these business challenges?
Below are some of the most common business challenges faced by SMBs.
1. Demand for products/services
So, you’ve always wanted to open an auto shop, and you finally have the means to do it. But you choose a neighbourhood with less population. Or a market that is already saturated with auto service providers. Not insinuating that your automotive repair shop will fail. But it will be very difficult to break in.
As with real estate, successful businesses are also driven by “location, location, location.” Don’t follow the herd to open a repetitive business. Instead, find an opening or an unmet need within your area. Then fill it with your service or product. It’s easier to address the pain points of customers rather than convincing them to invest in a new brand with similar products.
2. Where do I find customers? How should I retain them?
For a majority of SMBs, word of mouth and customer referrals are two main modes to create brand awareness. Mahatma Gandhi said in a speech in South Africa in 1980, “A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so.”
Even statistics point in this direction.
Image credits: Invespcro
That being said, as a business owner, you get the responsibility to cater to the needs of your customers at random times. Customers become patrons when they are taken care of. Even if they’re not paying big bucks, every customer should still be your priority.
Therefore, if you want to retain customers, build trust and credibility in their eyes. Having a great social media presence, a good website, appearance on Near Me searches, and top-notch customer service are the hallmarks of a good local business.
3. Lack of leadership skills
There’s no set eligibility to become a leader of a small or medium business. Still, considering the challenges of running a business and leading a team, many business owners falter as they do not possess the right skill set.
Running a successful business takes more than just a great idea. It requires leadership – and not every business owner is a natural-born leader. On the bright side, leadership skills can be learnt. Charismatic leaders:
- Are good listeners.
- Maintain transparency in communication.
- Are not afraid to make mistakes.
- Know how to delegate.
- Are optimistic, always looking forward.
- Hold themselves and others accountable.
The growth of a business is only held back by the ability of its leaders to both manage and lead. So, the next time your business is not growing as you hope, think. Maybe you can improve yourself to propel the business forward.
Psychologist and Author, Dr William Anton surmises this point in his article, Know Thyself: It’s Good for Business. He mentions that power and influence are concentrated at the top. Therefore, self-knowledge plays a crucial role in steering a business towards success.
4. Absence of a well-laid business plan
Every business faces adversities along the way. Hence, many believe that a business plan is not necessary. For them, tweaking the business as situations arise is the right way. Of course, a business can survive without a plan, but the presence of business goals paves way for even greater success. Harvard Business Review found that entrepreneurs who write formal plans are 16% more likely to accomplish viability than their non-planning peers. In fact, the report highlighted the kinds of business owners who believed in planning.
- High-growth oriented entrepreneurs are 7% more likely to plan,
- Innovators with disruptive products are 4% more likely to plan, and
- Business-owners seeking funding are 19% more likely to put their vision to paper.
So, which of these entrepreneurs do you want to be? More importantly, what heights do you plan to take your business to?
5. Identifying the right marketing strategy
There’s no owner’s manual to run a business – or to market one. Most business owners, therefore, rely on a series of trials and errors to generate brand awareness. They experiment with paid ads, tradeshows and events, social media, and word of mouth – and hope that something clicks. However, it pays to keep a tab on what your competitors are doing. Both online and physical marketing come in all sizes and shapes.
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