Small businesses have a uniqueness of their own in that they are just about taking the first steps in the world of trade and commerce. Hence, the problems faced by them are usually limited to the initial stages only and slowly fade away when they reach a certain stage of growth and development. However, for this to happen, small businesses must have the resilience to overcome the hurdles placed before them. So what are the challenges typically faced in achieving growth.
- Shortage of capital – This is very common with most businesses. Entrepreneurs have to come in with their own capital which can be their personal savings or borrowings from friends and relatives. Apart from this, they can avail credit limits from banks or other financial institutions but then a well projected business plan has to be in place based on which they can borrow from lending bodies. Devising such a plan is not easy and it is always advisable to take professional help for structuring such a plan.
- Shortage in trained personnel – Top flight professionals will generally avoid coming on board small businesses and start-ups. And even if they do, they have to be paid high remuneration, something that a fledgling business can hardly afford. It’s a Catch 22 situation. This is why most small businesses should outsource major activities like accounting and payroll management or even hire business consultants who can help them achieve their objectives at very affordable rates.
- Shortage of clients – Building up a broad client base is not easy and can take a considerable amount of time. In the meantime, small businesses, especially those in the service sector such as commercial cleaning or electrical trade have to depend on a handful of customers who often account for more than half the business turnover. If one or some from this group of clients renege on payments, the business will face a working capital crunch. The focus should then be on expanding the number of customers as quickly as possible.
- Shortage in back-up alternatives – For small businesses there is always a heavy dependence on the founder to guide the business and rarely is any thought given to building up a second line of defence. This can affect the business badly if any unforseen event like an accident strikes the owner. Thus a strong and robust alternate management should be built up speedily.
These are the main challenges faced by small businesses in achieving growth.