Small Business Must Overcome These 5 Challenges
Keys to Success in the Small Business Sector
Small businesses face their own unique set of challenges in the modern business environment.
In the late 20th century, it seemed that small businesses were slowly yet surely being swallowed up by the large national and multinational corporations. While the global giants still exist, the modern era has seen something of a resurgence for small businesses, thanks to lower start up costs and reduced barriers to entry in the digital world.
However, just because something is possible, that doesn’t mean it’s easy – while more new businesses start up than ever before, the majority will not survive beyond two years. This firm of Peterborough accountants deals with small businesses in the area day in day out, and has highlighted the following key points for survival.
1) Relying on that key client
Having a great client who gives you lots of work or regularly buys plenty of what you are selling is great. But when that client makes up a disproportionate percentage of your overall turnover, it is an immense risk. Customers come and customers go, it is all part of business, but if that one key client makes up 30 percent of your turnover, then losing him could put you out of business.
Diversifying your client base is easily said, but sometimes more of a challenge to do. Even if that key client pays well and you enjoy fantastic margins, it can be better from a risk management perspective to focus on winning more smaller clients at reduced margins.
2) Cash flow
We mentioned above that the majority of new businesses fold in the first two years. The most common reason has nothing to do with their strategy, or the product, or service they are delivering. It is because they run out of cash.
Keeping close control on money is crucial, and failure to do so will result in disaster. There are some areas in which a small business must economise, but don’t cut corners when it comes to book keeping.
3) Relying on key people
A business’s most important asset is its people. But for a small business, that often translates to “person.” Most small businesses are heavily reliant on their founder – how would yours survive if you were run over by a bus tomorrow?
Succession planning is crucial for long term viability, and needs to be documented and formalised for all key roles.
Most small businesses have ambitious growth plans. But sometimes, what gives them their unique competitive advantage stems from the fact that they are small. What is your business’s USP and is it scalable without compromising its unique quality?
This is closely related to number 3). Small business owners and their staff typically put in whatever hours they have to, in order to make the business succeed. The trouble is, this can easily become a way of life, with 15 hour days and seven day weeks becoming the norm. Worse, there is the fear that the business will grind to a halt if they should take a week off.
Nobody can work like that indefinitely, and it will harm both the individual and the business to try. The trick is to get into good habits from the outset.