Small business problems are the daily menu of an entrepreneur. As a business owner you must keep a focus on revenue and profitability and, at the same time, handle the obstacles that come to you.
Fortunately, you don’t need to act on each of the challenges. It’s possible to prioritize the issues based on the impact to your business, and solve it one-by-one.
Let’s build a framework for prioritizing small business problems first. We’ll discuss solutions to the six challenges with the framework later.
Prioritizing Your Small Business Problems
Three non-financial measures of a business are effectiveness, efficiency, and productivity.
Effectiveness is about doing the right things. Efficiency measures how you do things right. And Productivity is the result of doing the right things in the right way.
Effectiveness must come first. The “right thing” is your company’s purpose. If your purpose is serving customers, make sure all the people in your organization do their best to satisfy their needs and wants.
Efficiency is the next step. Once you have focused all resources to do the right things, it’s time to look for a better way. Delighting customers are your first priority. But you want to do it more efficiently.
Productivity measures how effective and efficient you’re managing your resources. For our example, a metric to track your productivity is customer satisfaction rate.
We’re talking about measurements and metrics here. Our only concern is small business problems and challenges that we can control.
For the other uncontrollable issues, we’ll let the organization such as National Federation of Independent Business (NFIB) to fight for us.
Issues related to taxes are a good example. We can almost do nothing about taxes and regulation. But there is a situation where we’re looking for more favorable tax rates by moving from our state (country) to another state (country).
We’d also learn about which trouble to tackle first. Once we know our “right things”, we’ll have a look at all obstacles that keep us from getting them done.
Now let’s find out each of the small business problems and the solutions one-by-one.
1. Slowing Down Sales Growth
Growing is the name of the game. You want to focus on growing your business, no matter what. That’s your goal.
Slow sales and economic trends are not the right excuse for creating a scapegoat. Blaming external factors like recession and tough competition for not growing won’t make you go anywhere.
There are still many things under your control. One of them is looking at the elements that make up sales revenue: prices, number of buyers, transaction size, and frequency of transactions per buyer.
Did you charge too little? Can you do different marketing campaigns, or intensify the existing one, to grab new customers? How do you make customers buy more often?
Check your sales pattern over a period of time. Is it seasonal or cyclical? What promotions can you offer to customers during a low season/period?
Are your existing customers repeat buyers? Stay connected with them to learn about what they’re saying. Listen carefully if they mention a benefit they want or an advantage of your competitor’s product. That is your opportunity for realizing more sales.
2. Wearing Too Many Hats
If you were starting a business from scratch, chances are you did most of the things by yourself. It might begin with an entrepreneurial vision or a simple business idea. In an excitement, you wrote a plan to devise strategies for making it a reality.
Setting up physical facilities, like an office, furniture, and supporting equipment, were one of your steps to get ready for business. Once you were open for business, orders might start coming in. You took the payments and fulfill the orders.
You did the marketing, the bookkeeping, and the scheduling. You essentially handled all the tasks by yourself to keep the business running.
But here’s what might happen to your business. The arrangement works up to a certain point. When you go beyond that point, however, problems begin to escalate.
Missing deadlines, working long hours, and information overload are some of the signs.
If you’re in such a situation, take a distance from your business. Try to work ON your business and not IN it.
Play to your strengths and delegate other tasks. Consider redesigning your works so you can coach more and do less. If you think it’s necessary, hire a coach to keep you on track.
Keep a record on how you spend time for 2-4 weeks. Then have a look at the percentage of time you spend as an entrepreneur, a manager, and an employee. Study the time spent for functional tasks like marketing, accounting, and operation.
When analyzing the data, group it based on the effectiveness and efficiency categories.
Your goals are doing the right things and leading your people to do what is right. If the result shows you’re moving to the opposite direction, try to delegate the tasks that make you so.
3. Poor Money Management
Poor money management can break your business. Without enough cash reserves your business won’t run smoothly. But how do you build cash reserves?
In a good economy, money is easy to earn. Customers pay on time so you can reserve some cash to keep up with the increasing revenue. Even if you need business loans or line of credit, your bank will gladly offer you credit with favorable terms.
However, the economy has its cycle, which is up and down. You want to prepare for the worst.
Don’t wait to do things right until the economy in its downturn. Consider creating a company-wide efficiency program with a goal to reserve cash that allows you to cope with the recession, when it hits you.
Take a look at your cash flow. If you tend to be short on cash, create 8 weeks cash flow plan.
If you carry inventory, check your Cash Conversion Cycle or Cash Cycle (CC)–measured in days.
Let’s say your RC 31 days, IC 49 days, and PD 56 days. Your CCC or CC turns out to be 24 days. Those are the days where your business process ties up your capital.
To do things right, try to shorten the Cash Cycle. First, check your inventory level and its assumptions. Second, find ways to extend payables plus speed up collections. Third, learn where to obtain short-term financing if you experience a spurt in sales.
While you run your business, make sure to build your business credit. Try to apply for business credit cards and small loans, then pay on time. That’s a simple way to show your creditworthiness to banks and lenders.
If your creditors grant you credit lines, accept them to build your credit history even further. An excellent credit score allows you to gain more access to low-cost capital from a lender like Kabbage, which allows you to grow your business.
Hiring an accountant to help you with bookkeeping will be helpful too. An exceptional accountant can help keep your books to minimize tax liability and make it more attractive to lenders.
4. Unable to Hire Qualified People
Many business owners find it hard to obtain qualified people. And if those employees are available out there, they can’t compete with big guys that pay the top dollar.
The term “qualified” usually refers to “highly skilled” or “experienced”. In this case, qualified people are often not the answer to your need, especially if they aren’t used to work in a small business environment.
Employees coming from the corporate world tend to be more specialists than generalists. They become a specialist as corporations design their organizations to support “specializations.” And the firms own a lot of resources to do just that.
On the contrary, the small businesses grow different breed of people. With limited resources, the small guys like us have to foster generalizations and grow people with general skills.
For that reason, it’s favorable for you to hire a skilled employee from other small businesses. If not, here’s what you can do.
Have a look at what you mean by “qualified.” Are the skills essential for enhancing your competitive edge?
If so, you have two options: hire people with the qualification or grow internally. The first option is expensive, but you can get fast results. The second one is cheaper, but it requires you to work hard upfront before you can enjoy the fruit of your labor.
If the skill doesn’t affect your competitive advantage, no need to do it internally. Just outsource the work to an outside contractor so you can focus on resources that improve your core competencies.
Once you have surrounded by qualified people, your next challenge is how to retain them. How to keep the quality people motivated and happy working with you?
One answer is keep growing and growing so there are ample rooms for the employees to grow with you. Another one is promote a work environment that supports collaborative achievements.
Just create a performance evaluation system that support your company’s goals. Make your employees accountable for both individual and team results. And apply it to all decisions related to salary increase, bonuses and promotions.
5. Tough Competition
Tough competition may mean a challenge or a threat. It depends on how you look at it. It’ll offer an opportunity to train you to be stronger and stronger or even kill your business.
What if a competition means all players sell the same commodity product? Yes, it can kill your business for one reason. The only way to win in this market is to offer the lowest price.
Fortunately, there are always ways to differentiate your product and service. Even if you sell a commodity product there are people who want to pay a premium price.
The key to winning in a fierce competition is to listen to your customers. Here’s one way to listen to your audiences.
Take a look at your product and service. Is the differentiation clear enough for your existing customers? Just ask them why they choose your product over your competitors. If the findings are not what you’ve expected, try this tip.
Let’s say you want to sell goods that are available on Amazon. If the product you’re trying to sell is quite popular, chances are you can find user reviews.
Just search the product and look for reviews with 3 stars. Carefully read some reviews with 3 stars rating. Take a look at them and find a pattern. If you can pick up a strong, repeated pattern just adopt it for differentiating your new product.
6. Not Listening to Clients
The point isn’t that you ignore your customers. It’s far from that.
It’s probably you don’t apply the right methods and tools for understanding their needs and wants.
What you want to assess is whether you really know who they are, and how to begin talking with them.
There are many ways to meet them for getting a conversation going. Some of them are social media, forums and your blog posts.
Your website and blog must be your first priority. Writing tutorials and practical tips that answer challenges they face are one way to connect with them. Creating memberships that offer two types of services for customers and non-customers are another one.
Email newsletters are also a superb tool. You can send weekly or monthly newsletters with topics that interest your customers. With the right tool, you can segment customers and prospects, and then tailor your email content to the their particular needs.
When emailing your customers, remember to put links to relevant posts on your blog. This way you connect different media to build your brand, while keeping in touch with them.
When it comes to selling, give your clients coupons, promotions, and relevant reward programs. Try to cross-sell and up-sell your offerings with relevant product and service. But keep your focus on helping them get the most out of your product.
Social media also offer opportunities to get to know them. But you have to know which medium is right for you. For example, Facebook is for families and friends but Linkedin is for professionals.
Investing in customer relationship management software is a wise decision. The app helps you view your customers in great details. Just develop the best strategy and grab the right program, and your listening ability becomes your differentiation.
Lessons Learned from the Small Business Problems
Small business problems can be controllable or uncontrollable. The challenges may be the results of our own mistakes or ignorance. The obstacles to our goals may also come to us, but we don’t know what to do with them.
We want to focus on handling challenges and problems we can control. This includes determining what to control and selecting the right metric for tracking our achievement.
After that, find the right things to do–effectiveness. Those are initiatives that overcome major obstacles to reaching our business goals.
Only go for doing things the right way–efficiency–once we’re confidently moving to the right direction. Finally, here’s the theme that shows up on most solutions.
Keep growing and growing; a growing business adds value to all stakeholders.
Now it’s your turn.
I have provided critical small business problems that may keep your business from growing plus practical solutions.
No matter whether you agree with me or not, just share your opinion below.