7 Major Challenges Faced by Small Businesses and Tried-and-True Solutions

Starting and operating a small business is an adventure full of lots of challenges and many rewards. Research shows that 20% of small businesses fail from intense competition, while 38% of others collapse from cash flow problems. However, these figures don't fully capture the picture. Many small businesses have encountered these same challenges and emerged victorious.

In this article, we will offer strategies to help you negotiate the challenging terrain of entrepreneurship while also sharing important lessons from real entrepreneurs. Learning from those who have already traveled this road can help you get past obstacles and guide your small business toward success.

The most common challenges for small businesses

Small business owners often grapple with a variety of obstacles on their path to success. Some of the most common challenges faced by small business owners are:

• Insufficient cash flow.
• Intense competition.
• Time management difficulties.
• Scaling issues.
• Employee retention problems.

Let's look at the real-world case of Bonobos, a men's clothing retailer, and how it battled time management and expansion. To address these problems, it implemented a hybrid approach that combined e-commerce with brick-and-mortar stores. Bonobos' physical "Guideshops" offer customers an unusual "try before you buy" experience. Visitors can try on clothing and get style recommendations before buying their items online.

This innovative approach has allowed Bonobos to:

• Improve cash flow by reducing inventory costs at physical locations.
• Stand out from purely online or traditional retailers.
• Enhance time management by focusing on in-store customer experiences and efficient online fulfillment.

It also demonstrates the ability to innovate problem-solving in small business management by efficiently handling numerous issues at once.

1. Cash flow challenges

Effective financial management is crucial for small business survival. Many entrepreneurs struggle with cash flow, often leading to business failure. To better manage your finances, consider these strategies:

• Create a detailed budget and strictly adhere to it.
• Utilize financial software for accurate tracking.
• Maintain separate personal and business accounts.
• Establish an emergency fund for unexpected expenses.
• Regularly review and adjust your pricing strategy.

In 2016, Buffer, a social media management platform, had nearly depleted its cash reserves due to poor financial management. Buffer's turnaround story offers valuable lessons:

• They embraced transparency by openly sharing their financial struggles with their team and customers, fostering trust and support.
• Cost-cutting measures were implemented without compromising product quality or customer service.
• They sought external investment and advice when facing financial challenges.

Since then, Buffer has prioritized maintaining a healthy cash reserve to weather future financial storms. Small businesses can strengthen their financial foundation and increase their chances of long-term success by utilizing similar strategies.

2. The challenge of going up against a huge competitor

Small business success in today's overcrowded market depends on differentiating oneself from competitors. Eyewear giant Luxottica was controlling the optical market when Warby Parker entered the market in 2010. Despite the challenge of going up against a huge competitor, Warby Parker thrived by differentiating itself through:

• Direct-to-consumer sales model.
• Affordable pricing.
• Exceptional customer experience.

Small businesses can learn from Warby Parker's approach and implement the following strategies to differentiate themselves:

• Identify and focus on a specific customer group or product type that larger companies might overlook.
• Provide personalized attention and exceptional customer service that big corporations often struggle to match.
• Share your business's unique history and values to forge emotional connections with customers.
• Continuously improve your products or services based on customer feedback and market trends.
• Leverage your small size as an advantage, adapting quickly to changes in the market or customer needs.

Not often does innovation involve developing something totally fresh. It might entail refining a current offering or coming up with original answers to challenging situations. Constantly looking for ways to set your company apart from others and innovating within your industry can put you in a unique position that larger competitors may find challenging to copy.

3. Time management and juggling multiple roles

Small business owners often find themselves wearing many hats, which can lead to burnout and inefficiency. To manage time more effectively, consider these strategies:

• Implement the Eisenhower Matrix for task prioritization:
  • Urgent and important tasks: Address immediately.
  • Important but not urgent tasks: Schedule for later.
  • Urgent but not important tasks: Delegate when possible.
  • Neither urgent nor important tasks: Eliminate or minimize.
• Master the art of delegation.
• Use time-blocking techniques to focus on specific tasks.
• Automate repetitive tasks where feasible.
• Take regular breaks to maintain productivity and avoid burnout.

Effective time management and delegation are more than simply means of increasing output; they also help you to concentrate your efforts on the activities that really propel your company ahead.

4. The challenge of attracting and retaining a strong team

A strong, motivated team is crucial for small business success. However, attracting and retaining talent can be a challenge, especially with limited resources. Consider these strategies for building a powerful team on a budget:

• Cultivate a positive company culture that aligns with your values.
• Provide opportunities for learning and professional growth.
• Implement a system for recognizing and rewarding good work.
• Offer flexible work arrangements when possible.
• Hire individuals who fit your company culture as well as possess the necessary skills.
• Maintain clear communication about company goals and expectations.
• Encourage open feedback and ideas from all team members.

Mailchimp, which began as a small email marketing company, exemplifies the power of focusing on company culture and employee development. The company's approach to attracting and retaining top talent while competing with larger tech businesses has included:

• Hosting a weekly "Coffee Hour," a Friday morning speaker series for employees.
• Offering generous professional development budgets.
• Organizing team-building activities and celebrations.

Investing in their team's development and welfare has helped Mailchimp produce a motivated and devoted workforce that propels the business's growth. Developing a capable team is never-ending. As your company grows, regularly evaluate the needs of your employees, seek feedback, and be prepared to make changes to your plans.

5. Overcoming marketing challenges with limited resources

Effective marketing doesn't always require a large budget. With creativity and strategic planning, small businesses can still make a big impact. Consider these budget-friendly marketing ideas:

• Leverage social media platforms to connect with your target audience.
• Start a blog to share valuable information related to your industry.
• Collaborate with complementary local businesses for cross-promotion.
• Encourage and incentivize customer reviews and referrals.
• Implement email marketing to stay in touch with customers.
• Participate in or sponsor community events to increase local visibility.
• Create shareable content like infographics or short videos.
• Optimize your website for search engines (SEO) to improve online visibility.

Dollar Shave Club created a humorous video selling razors that experienced viral marketing success and offers valuable lessons for small businesses:

• They created a humorous video that resonated with their target audience of young men.
• The video had a clear message and call-to-action, keeping it simple and effective.
• The company's founder starred in the video, adding authenticity and a personal touch.
• The campaign was launched when subscription services were gaining popularity, capitalizing on market trends.

Through this strategy, Dollar Shave Club has been able to compete with well-known razor companies, and without spending a lot. Their success demonstrates that what's frequently more crucial than marketing expenditures is knowing who your demographic is and producing material that speaks to them.

Good marketing is about strengthening ties with your clients. Pay close attention to their demands and preferences, and then modify your marketing strategies as needed. Even with few resources, hard work and creativity can help you establish a powerful brand presence.

6. Technological challenges

In today's digital age, embracing technology is crucial for small business success. However, keeping up with rapid technological changes can be challenging. Here's how you can stay ahead:

• Establish a strong online presence with a user-friendly website and active social media accounts.
• Utilize free or low-cost tools for tasks like accounting, project management, and customer relationship management.
• Stay informed about emerging technologies in your industry through trade publications, webinars, and conferences.
• Foster a culture of learning and adaptation within your team.
• Invest in robust cybersecurity measures to protect your business data.
• Consider cloud-based solutions for improved flexibility and scalability.
• Provide regular training to your team on new technologies and digital tools.

TOMS Shoes exemplifies successful technological adaptation. The company leveraged technology to grow from a small startup to a global brand by:

• Developing a user-friendly e-commerce website to reach customers worldwide.
• Utilizing social media to share TOMS' social impact stories and engage with customers.
• Implementing a comprehensive customer relationship management (CRM) system.
• Leveraging data analytics to understand customer preferences and market trends.

With the help of technology, TOMS has been able to reach a larger audience and effectively run a worldwide supply chain. Their approach shows that choosing technological solutions that fit your company objectives and improve your operations is more important than merely employing the newest technologies.

Changing with technology is a continuous process. Frequent evaluation of your company's demands will prepare you to make investments in technology that's capable of promoting efficiency and development.

7. Dealing with burnout and prioritizing self-care

Entrepreneurial burnout is a real and serious issue that can derail even the most promising small businesses. To avoid burnout and maintain your well-being, consider these self-care strategies:

• Schedule regular breaks throughout your workday.
• Establish clear boundaries between your work and personal life.
• Seek support from a mentor or join a business support group.
• Make time for hobbies and activities you enjoy outside of work.
• Practice stress-reduction techniques such as meditation or regular exercise.
• Learn to delegate tasks effectively and say no to non-essential commitments.
• Prioritize getting enough sleep and maintaining a healthy diet.
• Plan regular vacations or days off to recharge.

Taking care of oneself is not selfish; rather, it is crucial for your company's long-term viability. These self-care techniques can help you to keep the vitality and attention required to run your small business.

FAQs on the challenges faced by small businesses

About the Author

Post by: Peter Cheel

Peter Cheel is a business coach who has a passion for helping leaders and teams grow. With a background in coaching psychology, he’s dedicated to guiding business owners and professionals toward success both personally and professionally. His goal is simple: to help you unlock your leadership potential and build a thriving business.

Company: BCS
Website: www.businesscoachsydney.com
Connect with me on LinkedIn.