Small Business, Big Problems - The
Top 5 & How to Solve Them
As a small business owner, you’ve most likely been tackling a variety of challenges since the very beginning of your journey. Starting a small business is a lifelong achievement for any entrepreneur, but it does come with its own set of unique obstacles.
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Maintaining and growing the business are just a few of the bigger challenges entrepreneurs will face. On top of those long term goals, some other problems small businesses face include sourcing the right people for the company and developing a coherent brand voice.
If you’re finding yourself nodding at the short list of issues we’ve already mentioned above, we’re here to help. For new entrepreneurs, these typical business problems can make or break their company’s success and longevity.
If you’re reading this, it’s safe to assume that you’ve already been brainstorming about the long-term success of your small business. We’ve listed the top 5 problems small businesses face, and have also included potential solutions you can implement.
Problem 1: Inexperienced Money Management
Creating monthly budgets, maintaining invoices, and managing cash flows are all critical aspects of smart money management. Some small business owners may feel confident in their ability to balance their own personal checkbook and believe that those skills cross apply to managing company money as well. In reality, experience with managing company money must be developed over time.
With busy work days full of extra challenges unrelated to money management, it can be difficult for small business owners to keep accurate records of their company expenses and revenues. As the company grows employee salaries will increase, office spaces will need to be expanded, and new company resources will need to be acquired. This means that creating proper budgets for each month’s overhead costs is a must.
On top of all of the above, many small businesses opt to take out a loan when starting off. This loan, along with a potential business credit card, adds even more facets to money management that can be challenging for those without strong backgrounds in accounting or finance. This is where many entrepreneurs can get caught up in the details and wonder how they can find their way out.
Solving the Money Management Problem
Keep track of all your money, all the time. Organized recordkeeping for all business expenses is a good habit to build for company longevity and shows banks that you’re ready, thorough, and responsible enough to receive a future loan.
If you are at an important stage of growing your business and are thinking about hiring an accountant or bookkeeper to do this for you, it might be the right decision to just go ahead and hire them. Having another pair of experienced eyes managing your records could be extremely beneficial to thriving small businesses that are hungry to keep on growing.
Accountants and bookkeepers can also assess milestones in your businesses’ development by mapping out legal procedures, growth projections and even getting a head start on collating your end of year financial statements and tax documents.
Make It Digital
Even if you’re able to build out a budget for the foreseeable future, making sure you’re staying on track is a different story. Fortunately, digital platforms like QuickBooks, Sage, or Xero can really enhance the control you have over your recordkeeping. These platforms are designed to help you manage and record inventory and cash flows, create expense reports, predict your taxes, and send invoices.
It may seem counterintuitive that in order to keep better track of your money, you need to spend money on a program that you are not sure is a right fit for your needs. You’re in luck, because all of the tools we listed above enable you to try out each platform for 30 days before paying a cent. Overall, digital recordkeeping is a powerful way to keep things in check and should be a staple for running any small business.
Credit Cards: Choosing Wisely
As mentioned before, personal finance and business finance tracking can be two different worlds. Making sure you’re on top of both can be challenging, and can add stress during tax season. That is why it's important to understand the distinctions between both.
Choosing the right dedicated business credit card is an important decision that every small business owner should take the time to think through. In the selection process many credit card perks and features can be distracting, giving you a seemingly endless selection. Some business credit cards may have travel rewards, no fees, 0% APR or cash rewards on purchases above a certain threshold.
The most important takeaway is that you’re conscious of and comparing all the benefits of the cards you’re choosing from. Of course, you’ll need to keep your credit score in mind before selecting, so make realistic decisions on a card that also has rewards and benefits your small business can utilize down the line.
If you believe your business has profits that you are trying to invest somewhere worthwhile, congrats! This means that your money management and growth has likely been smooth sailing so far. For some inspiration, check out our guide on Where to Invest Your Small Business Profits - And Why.
Problem 2: Difficulty Finding the “Right Fit” Employee
Some small businesses will inevitably face symptoms of founder dependence: where the core player in the business is the only one who can keep the business running day to day. This introduces several other challenges for these founders, including; the time and monetary costs of hiring and training new employees assist with running the business and getting work done.
New employees generally introduce a slew of costs including new equipment, benefits, more taxes and even potential bonuses. In more competitive industries, these costs will continue to increase as new employees expect better benefits and perks. More often than not, these challenges are also manifesting well before discussing an employee’s salary.
The team you build your business with is invaluable to the success of the business. With smaller businesses, a tight knit, small team of star-player employees can make all the differences. But with limited resources at the start of the journey, making sure every person counts can be difficult, and can also breed pickiness in the hiring process.
Another challenge with hiring and training employees is just that: hiring and training. Good time management skills become exceedingly relevant in hiring and training phases. Picking the right prospective employees and moving through the interview and recruitment process can be very time consuming, and could slow down progress in other areas. Similarly, training new hires, answering their questions and assessing their performance is also something that requires significant attention.
With all of the above challenges deriving from the hiring of people, it is no surprise that this small business problem causes much stress and frustration for entrepreneurs.
Solving the Talent Problem
Know What You’re Looking For
Before hiring new talent for your small business, spend time detailing exactly what you’re looking for in a new hire. Are you looking for a team member who is passionate about your vision for the business, and will support you no matter what? Or are you looking for diligent, highly skilled workers who will get the work done more efficiently? Crafting a careful list of desired traits is the surest way to make sure new hires are not only qualified for the work, but also live up to your company values.
Find Talent That Can Fill in the Gaps
As mentioned before, if you’re having trouble managing your money properly, hiring an account manager helps fill in that skill gap for you. Not every business starts exceptionally strong, and each has its own shortcomings that could use a skilled employee to support.
If you personally are spearheading projects and leading the charge on meetings, perhaps hiring someone who has a similar skill set may not be necessary at this point in time. Instead, opt for an employee who can keep track of what you’ve said, goals you expect, and what the next deliverables are.
Having a crystal clear understanding of the job skills needed for each open role is a top priority when solving your employment problem. Additionally, making sure your expectations and requirements are clear to the potential new talent is just as crucial.
If you have important roles and positions you’re trying to fill, use this as an opportunity to instead take as much time you need to fill those roles. Many young businesses are too desperate to fill roles, and end up realizing too late down the line that the new hire was not the right fit.
Taking your time in an interview to ask questions about hard skills, career goals, previous projects, or leadership experience can be useful in exploring a potential candidate's outlook and personality. Give potential candidates time and space in interviews to explain themselves, and make sure they feel comfortable around you. This means not making interviews seem like you’re just going through the motions.
If you end up having some apprehensions about a new hire, checking their references is the proper step to take. Consider the feedback their references give, then think carefully about how we’ll they’d fit in while on your team. All in all, being patient and level-headed with the hiring process benefits you, your business, and the new hire.
Are you looking to hire a receptionist? In our modernized world, you may benefit from outsourcing this role to an answering service. We’ve compiled a helpful list of the 5 Best Small Business Answering Services of 2019.
Problem 3: Difficulty Finding a Brand Identity or Voice
An idea, product, or service is a great catalyst for a business. A brand identity and voice is how you position your business to the world. It's no surprise that this part of the small business process can take the longest, and can also undergo the most dramatic changes.
However, as time passes and goals, values, and visions change, so will a company’s brand. Branding is something that even large companies will consistently reinvent and revise. Although finding a brand identity may be a strenuous process, it is a far too common evolution that even established companies face.
Small business owners are often faced with many existential branding questions, like:
- How do we define our brand?
- What personality or energy should our brand radiate?
- What channels can we use to push our message to the world?
- How do we want our clients or customers to feel about our brand?
- How do we iterate our branding based on newer customer tastes or our competition?
Solving the Branding Problem
Find Your Specialty
There will inevitably be competition in any industry a new business decides to enter. Inevitably, there will also be newer, more fresh competition as you continue to build your company. This is why finding your specialty becomes increasingly pertinent: it makes you distinguished amongst the endless sea of competitors.
Some important questions to ask when solidifying your business’ specialty are:
- What are the values of my target demographic?
- What are the values of my company, product or service?
- What do we want our clientele to remember about us?
- What features, values, or personalities set our company apart from others?
- How can we weave together our specialty and our values?
- How do we talk to people about what we do?
Finding your small business’ speciality can help solidify your brand identity and positioning.
Ask For Feedback, And Don’t Stop Asking
While market research and competitor research are necessary steps, they are still largely internal processes. At both the macro and micro level of running your business, the most effective way to learn about your branding and positioning is to ask for direct feedback.
Brutal honesty from your target demographic can go a long way. Understanding how your brand sits in people’s minds compared to your competition helps identify your company’s strengths and weaknesses. It also allows you to get creative with how you receive the feedback, be it through surveys, tests, or focus groups.
If time and resources are of the essence, the best way to get immediate feedback is by creating and practicing an elevator pitch about your brand or company. If your company is more product or service based, go through the broad strokes of what you do as well. If you can practice or perform in front of, say, family, friends and colleagues, you’ll have a near instant idea of roughly how your company appears to the outside world.
Problem 4: Limited Client Diversity
Small businesses with high stake clients could be in a tricky situation. For example, if one or two out of many current clients contribute over half of their income, there should be some glaring red flags for that specific company.
These types of clients are referred to as “whales,” completely dwarfing other clients in terms of how much they contribute to your revenue. With the risk of losing a huge portion of your income at once, but also being too small or young to negotiate better deals with these clients, entrepreneurs can feel stuck in a less than ideal position. If you lose a whale, the smaller clients may not be enough to keep the business going.
Think of it this way: if you have a single client that comprises over half of your company income, you could be classified as an independent contractor instead of an independent business owner. Figuring out a way to transfer or reduce the risks of “whale” clients is something many new entrepreneurs will juggle until they gain enough traction to diversify their client base.
Solving the Problem
Start by Evaluating Current Whales
Take the time to really understand and evaluate the whales in your client list. Carefully consider your revenue sources and metrics, paying close attention to the 80/20 rule. This rule begs the question: Is 80% of your company’s revenue derived from 20% of your clients? Having a good relationship with these whales is definitely a plus, because it reduces the risk of them suddenly leaving you out to dry. But taking whales for granted means that should they leave, you’ll suddenly have a lot of catching up to do.
Getting the lay of the land and assessing the relationships you have with these whales is the first step in diversifying your client base. Are your relationships with these clients strong and thriving? Or are they on the verge of leaving? These are critical aspects of your business you should always be aware about.
Encouraging Client Diversity Through Your Brand Image
One way to increase client variety might be by exuding diversity through your brand image. This means focusing closely on your website, social media, and other potential online resources that prospective clients will use to learn more about your business.
Making sure that clients aren’t turned away from your business because you’ve geared your site towards a single client’s industry is critical. Your online presence is also an amazing way to appeal to clients who potentially speak another language. This could be an amazing competitive advantage and a way to access new, clientele across the board.
Aside from your online presence the way you interact with clients after closing deals is also crucial. If your clients are aware that you like to follow up after deals, sales, or contracts in order to touch base, they feel the individualized attention that other companies may not have. Adding a personal touch with your clients doesn’t just go both ways, it also encourages clients to share positive experiences, interactions, and initiatives with other potential clients too.
Problem 5: Difficulty Scaling / Stagnating Growth
There comes a time in every small business’ growth where sacrifices must be made. Not all of these sacrifices are game breaking. Instead, we’re referring to examples like not being able to personally manage every single client, or not being able to inspect every single product alone.
Some entrepreneurs may have difficulty relinquishing their power and responsibilities. This is often the biggest barrier in their way when it comes to growing their company. These entrepreneurs find themselves almost bound to their habits and ways, trusting that everything they’ve accomplished so far has been with that work ethic.
These gripes and obstacles are often referred to as the “growing pains” of scaling a small business. Whether it be from wanting to scale but not wanting to compromise, or from scaling too rapidly and recklessly, serious time needs to be taken in order to ensure steady, healthy growth.
For most small businesses, there is a sweet spot between an obsession with the small details and rapid scaling of the company. This is where a small business owner has to come forward and “steer the ship” in order to navigate the intricacies of growing and scaling the brand, but compromising where need be.
Solving the Problem
Slow Down and Think
Growing your business will take time. Having the patience and self awareness to recognize that success doesn’t happen overnight is one step forward. However, being able to not be deterred by slow progress is another, more demanding step.
Many entrepreneurs try to rush their business expansion. This can lead to corner cutting, careless management of finances, and hiring the wrong talent as well. Slow down. Think about the effects of each decision being made, but also make sure you’re sticking to a realistic growth plan.
Laser Focus on Current Weaknesses and Threats
As mentioned before, a blind focus on growth can lead to oversight in other important business operations. Instead of falling to this common result of overeager expansion plans, assess the current weaknesses of your company, and evaluate the legitimacy of any threats to your growth.
The important part is not only to be aware of these weaknesses or threats, but also to make sure to address them immediately. These issues should be taken care of well before new clients, employees, or responsibilities come into play. Common weaknesses to be aware of are overspending, inefficient workflows, and poor communication.
Set the Company Up for Success
One thing to remember about growing is that your company must be ready to grow. Part of making sure growth is realistic is by doing a deep dive into the current company structure. More work means busier employees, more time meeting client-specific needs, and more time spent in the office.
The easiest way to set the company up for success is, again, by asking for feedback. This time, seek as much internal feedback as possible. Ask your team if they feel comfortable taking on more work or more clients. Reflect on workflows and communication procedures, and look for ways to improve them and future-proof them.
Ideally, in this process you’ll either be able to trim the fat from various aspects of how your company runs and optimize the business’ efficiency. These are all prerequisites to being able to take on more work and grow the company.
Solving Small Business Problems In a Nutshell
You’ve made it to the end of this list, and you probably read it all for a reason. You may be running into some or all of these small business problems, and are becoming self aware of the negative effects they can have on running your business.
As a whole, staying calm is perhaps the best way to approach any of these problems. Again, realize that other businesses are facing and have faced similar issues on the daily. How you end up responding to these problems and their effects is what will ultimately make or break your business. Challenges are meant to be overcome, but some definitely won’t be easy.
All in all, keep your business tidy, make sure you’re carefully sourcing the right talent, crystalize your brand identity and voice, be careful and aware of “whale” clients, and always be ready for growth before you think of growing.