All businesses have challenges that they face. However, SMEs often find themselves facing more challenges than most when they are getting their business off the ground. So, what are some of the most common challenges facing SMEs, and how can you address them?
Managing Cash Flow
One of the biggest concerns for SMEs is the management of cash flow. The lack of steady and stable cash flow is the main reason why many small businesses fail. One survey showed that 10% of owners and managers had concerns over the cash flow in the last trading year.
Waiting time for invoices is one of the biggest causes of this concern for many small businesses, with the average waiting time for payment being 72 days.
There are a few things that SMEs can do to manage cash flow concern. The first one is to improve your waiting time for payments which can be done by making clear the mandatory payment date in contracts, offering rewards for early repayments or fees for late ones as well as tracking invoices.
Another way to stay on top of cash flow is to rethink your pricing structure to make sure you are not underselling your products or services. This will help to average out your cash flow.
Being a new and smaller business, you are likely to face some challenges when it comes to marketing. There are likely to be bigger, more well-known brands out there in your field, so marketing is key to survival.
To ensure that your brand is getting the exposure it deserves, here are a few things you can do to improve your SME’s marketing.
Utilise social media as this can drive a lead to plenty of opportunities. Engage with your consumers online by replying to comments and tweets and running polls. You can also use the data collected from these interactions to drive your brand further. Creating content is another good way to draw attention to your brand, as well as making your SME look like a trusted source of information.
Strategy and Planning
A lack of strategy and planning in most SMEs leads to reduced development of leadership. This can result from a lack of leadership knowledge, no business planning or bad strategy execution.
Ensuring that you are hiring the right people to help lead your business is key as the right people will help your business grow and develop. Many online tools can assist with businesses planning to ensure that confusion or lack of direction doesn’t happen. Try creating a three-year plan for your goals, then break that down into 12 months, then again down into 90-day objectives.
In the UK, SMEs make up 99.9% of private sector businesses, employ nearly three-fifths of its workforce and are responsible for 48% of its turnover. This fact is like a double-edged sword for SMEs. While it is amazing to have such a well-saturated industry, it also often leads to a type of stress disorder known as “office burnout”.
Office burnout is a state of physical, emotional or mental exhaustion that is combined with doubts about your competence and the value of your work. This is often attributed to long working hours and heavy workloads. Research has shown that 47% of SME employees regularly work 4+ hours of overtime a week, 29% of which do 7+ hours while 52% say those hours are unpaid.
To avoid office burnout, there are a host of things you can do to make sure you are handling this added stress effectively. Make sure you are doing regular wellness checks, staying positive, taking time to relax, managing workloads better and asking for help when you need it.
For SMEs, competition is a clear risk as there are bound to be larger and more well-established businesses in your industry. While this has disadvantages, there are also advantages to be found here.
For example, larger businesses may have the resources and money to invest in larger-scale marketing campaigns, whereas SMEs likely won’t. But, on the other side of that, larger-scale businesses are unlikely to have the time to invest in their consumers in the same way that SMEs can. This gives the SMEs the competitive advantage of interacting with their customers to get to know them better, listening to feedback, perfecting customer service and offering customers personalised shopping experiences.
By keeping on top of these 5 areas, SMEs can improve their business operations and continue to grow and develop with minimal difficulty.