Small businesses face a variety of challenges during the early years. You are tasked with taking an idea from the early stages through to sales, marketing, and delivering that product or service. This may be difficult for you in your first year. If care is not taken, you will run out of business. This, you do not desire. This article will show you how to overcome challenges facing small businesses.
As a startup, having a business is a dream come true. You overcome the stress of working 9-5. You become your own boss and have the opportunity to work at your own pace. You can go on vacations and take breaks without having to take permission. But then, starting a business is not as rosy as it seems.
What are the challenges you can face? What are the things you need to prevent them? And if at all they happen? How can you overcome them? You may have a lot of questions like this running through your mind. Worry not. This article is aimed at helping you succeed at your business. Hence, it covers a lot of the challenges and practicable ways to overcome them. To better understand this aim, you need to understand the concept of small businesses. What concept? Read on!
What is a small business?
You must think that based on the words, small businesses mean businesses that are small. Well, you aren’t wrong but there is more to what you think.
Over the years, there have been various definitions of small businesses by various authors. Hence, the meaning of small business cannot be said to be adequate in a single definition. Surprising? Keep reading.
Robert in 1994 defined a small business as an independently owned business that has a capital contribution from limited numbers of individuals. It operates in a local area and is probably not dominant in its field of operation.
Chris et.al in 2000 defined small businesses as those which are owned and controlled by one or a few persons. This involves direct owner’s influence in decision making and having a relatively small share of the market in the applicable industry.
According to the National Economic Reconstruction Fund (NERFUND) and World Bank Sponsored Small Scale Enterprises Scheme;
A small business is an enterprise whose fixed assets plus the cost of investment do not exceed #10,000,000 (Agu 2005). These assets exclude lands.
Based on a definition from the Central Bank of Nigeria;
Small scale enterprises are the ones whose capital investments (including land and working capital) do not exceed #5,000,000. Or those whose turnovers do not exceed #25,000,000 annually.
That’s not all, Nigeria bank for commerce and industry (NBCI) also has a definition for small businesses. NCBI defined small businesses as firms whose assets do not exceed #750,000 (Agu 2005). These assets include working capital but excludes lands
From these various definitions, small businesses cannot be given a universal definition. However, a common goal can be reached.
Based on the definitions from these scholars and bodies;
A small business can be defined as a privately owned organization with fewer employees, less workforce, and less annual revenue. It functions on a small scale level involving fewer capital investments, less labor, and fewer assets.
As earlier mentioned, these definitions vary. In this variance are similarities and these similarities gave way to the characteristics of a small business.
Characteristics of a small business
These characteristics will be summarized into an abbreviation called POL³. What does this mean? This is just starting to get interesting. Check this!
- Proprietorship and control are merged. The founder works as the Owner and performs the activities of managing and overseeing the work processes simultaneously.
- Open to sudden change. Their strategies and techniques can change as they’re still at the beginner phase.
- Limited Reach. Small businesses compared to large ones have restricted areas of operation.
- Labor intensive with a fewer number of employees.
- Limited resources.
There you have it! The POL³ characteristics of small businesses. Do all these characteristics fit your business? Then this article is for you.
The above is a glance through the concept of small businesses. Having understood the concept, what challenges do small businesses face?
Challenges Facing Small Businesses
You must have been inspired by a lot of big businesses succeeding and making tons of profits. And you want to do the same, make a lot of profits when you start your business. Did anyone tell you this? Then you’ve been lied to. You won’t make as much profit as you want to unless you set the barricade way too low as a profit target. And that’s the truth.
In fact, you will be faced with a lot of unexpected circumstances. The next few lines explain the challenges you can face as a small business owner.
1. Budgeting and financial planning
Money problem is a major challenge that small businesses face. You have limited capital for the execution of your projects. This limitation defines the position you will find your business in the next few years
2. Finding the right customer
As a small business owner, you have few customers making purchases at the start of your business. Low purchase equals low profit.
3. Managing work flow
Small businesses have fewer human resources and hence managing workflow can be tasking.
4. Quality and growth
Balancing quality and growth is a pivotal need in business, but it can be challenging. One moment you’re celebrating landing a big client, another time, you have to deal with the requests of a new client.
5. Lack of time
As a small business with ownership and control merged, it will be tasking to manage time. You’re the one in business and you’re still the person doing the business. Did you get that? This means that you are the one responsible for executing business plans and winning new businesses but you are also the one involved in doing primary activities such as answering phone calls and dealing with vendors.
6. Increasing brand awareness
Small businesses have to deal a lot with getting recognition compared to big brands
7. Building an email list
Email marketing is still ranked as the most effective marketing channel. Unfortunately, not all small businesses are aware. It converts a lot and will double your profit levels. However, building an email list for small business owners can be challenging. You’re just starting. You need to create amazing content, give value and build trust from your client base.
That’s it! 7 unavoidable challenges that small businesses face. Even though you now know what these challenges are, that is just the bare cake. The frosting of the cake lies in overcoming these challenges. And that’s where the beauty is.
So far, you’ve been able to understand the concept of small businesses and the challenges you are likely to face as a small business owner. Overcoming these challenges is the final call.
How to overcome challenges facing small businesses
The part is what you’ve been waiting for. Be very careful while you read. These paragraphs reveal 5 proven to work ways to overcome the challenges facing your business. These are general solutions to whatever problem you can face as a business owner. Number 4 is my favorite.
1. Effective financial planning and management
Money management for small businesses can be quite an issue. Effective financial planning and management is the number one solution to solving this money issue.
In addition, some projects return higher profits than others. Invest in such projects that have a good payback
2. Adopting new strategies and marketing techniques.
One of the characteristics of small businesses mentioned earlier is their susceptibility to new changes. This is an important way to overcome your challenges. Before beginning a project, craft a strategy and estimate your expenses. When old techniques start to fail, adopt new improving ones. Remember to include email marketing as one of your marketing strategies.
3. Stay in competition
Your product has already been created by someone before. If not entirely, then in a whole lot of similarities. Even when you think you’ve found your niche, there are various companies you need to compete against. Stay in competition and constantly update your products with the preferences of your consumers. Give your consumers a reason to choose you. Want to know how? Look at number 4!
4. Emphasize your uniqueness!
The truth is, you aren’t unique. Your products are not unique. It’s something your consumers have seen before. And remember I told you that number 4 is my favorite? Here’s why! Emphasizing what makes you unique help to make your products stand out. It helps you to fully utilize solution 3. Yes, it helps you to stay in the competition.
And in competition, when you get unique, when you do something different that people know you for, you catch their attention. That’s more sales and more purchases.
5. Efficient management of large client base
For a small business, every new client is important. As time passes, you build a solid customer base. With time, attending to your customers and performing other duties will become imbalanced. To balance the equation, you can hire a customer relations officer to keep track of all customer relations. This will help to increase brand awareness.
On a final note, excelling as a small business can be tasking, time-consuming and exhausting. But you can excel regardless. The information contained in this article is to help you as a guide. I hope you will be able to overcome these challenges. Remember, big companies started small too.