Sustainable growth is one of the most significant challenges faced by small businesses. As you grow your company, different opportunities and obstacles will arise – and each will demand a different solution. After all, when a business expands, you have to adapt your approach to everyday problems. For instance, what solved an issue amongst a team of 3 may not be applicable to a team of 11. Furthermore – and this is arguably the most crucial point – you need to make sure the solutions you implement today don’t create problems in the future. Therefore, it is essential to recognize these problems, be adaptable, and work towards overcoming these challenges in a flexible way. Below, we run through 4 challenges faced by small businesses – and what you can do about them.
The key growth challenges faced by small businesses
1. The problem: Managing cash flow
Cash flow control is essential to a growing business. This is because financial constraints will be the biggest limiting factor to growth – and ultimately, mismanagement can lead to disaster. For example, CB Insights found that cash flow mismanagement was the second most common reason small businesses go bust (the first was a lack of market need). Although it’s certainly true you have to spend money to make money, entrepreneurs need to ensure they’re in control of their spending, or they can end up in a precarious position.
The solution: Securing outside investment
Making sure your finances go as far as possible should be a key element of your business plan. This is especially important during the lean years where you have to be strategic about the opportunities you take and those you pass up. Remember, if an opportunity starves the business of core funding, then it’s not worth it. Instead, you need to make sure every aspect of working capital is carefully controlled. Effective credit management is key to this strategy; for many businesses, a key decision is whether or not you should secure outside investment to maximize free cash flow. With this support, you can underpin growth. However, when you’re shopping around for funding, it’s essential to make sure it is affordable.
2. The problem: Keeping up with the competition
The problem with success is that inevitably, there will be competition. When your product or service sells well, others will identify the opportunity and enter the market. Unfortunately, many small businesses are unprepared for this reality – making it one of the key growth challenges faced by small businesses. Consequently, apparently loyal clientele can quickly find alternatives in a newly saturated market. Competitive markets can squeeze profit margins and sales growth, so small businesses can lose their footing and fall behind.
The solution: Do your research
Market research is critical to keeping step with the competition. It shouldn’t be something you do as a one-off after you launch – it should be an ongoing, developing process. Without up-to-date market research, you are at risk of making decisions based on out-of-date intelligence. Therefore, you need to take the time to talk to your customers, suppliers, and business partners. Also, encourage your employees to share any customer feedback to stay abreast of public opinion. Furthermore, keep a close eye on the data your company collects, as this is often a goldmine of consumer insights.
You should also take a look at information that’s already been published. These documents can provide useful insights into market conditions and sales trends. Alongside your own research, you can use this intelligence to build a detailed picture of what consumers want, and how you can respond to intensified competition.
3. The problem: Knowing when to let go
The best entrepreneurs are natural leaders. However, sometimes, it will be these excellent leadership qualities that will hold them back. Being too controlling can often mean that you’re overstretched, or worse, not doing the best possible job. Sometimes, it is a mistake to place too much faith in your own abilities. Instead, you need to delegate and outsource in order to effectively implement a company growth strategy. What’s more, as your operations become more complex, you’ll need to improve your time management skills to ensure you’re focusing on what matters most.
The solution: Getting the help you need
One of the best ways to expand your business is to accept that you can’t oversee every single detail. By putting some trust in your team you can nurture creativity, motivation, and dynamism. Furthermore, as your business grows, you might need to bring in freelancers or consultants to make the most of your resources. By delegating tasks to well-selected specialists, you can make sure you’re maximizing the potential of your business opportunities. When choosing who to work with, make sure you let your company values guide your hiring decisions – this will allow your company culture to develop and flourish.
4. The problem: Inconsistent operations
Every business produces a vast amount of data, including financial records, customer interactions, communications with suppliers, employee data, and regulatory documentation. As a result, you need to ensure all you fulfill all your operational and legal requirements. Therefore, documentation and procedures are essential to a business expansion strategy. After all, informal processes that work with a few trusted allies are unlikely to continue to function as your ability to oversee every aspect of business operations weakens.
The solution: Establish systems
Although learning to delegate is crucial to business growth, it is important you create solid systems to ensure standards are consistently high. Therefore, you need to put an infrastructure in place to ensure expansion is well-managed. Investing time in devising these systems will pay off in both the long and short term. Not only will they streamline everyday business functions, but they will also ensure that onboarding for new employees is efficient and effective.
Rising to the challenges of business growth
Expanding a company is a process – and this process inevitably comes with bumps in the road. The key to overcoming these challenges is a delicate balance of stringent management and effective delegation. This approach will take discipline, planning, and commitment, but ultimately, the benefits will be significant. With carefully managed finances, thorough research, robust systems, and a great team, your business (and bank balance!) can flourish. Although the challenges faced by small businesses will vary from sector to sector, with these 4 rules of thumb, your organization can go from strength to strength.