5 Small Business Challenges & the Practical Ways to Overcome Them
We all hear about the big, multinational companies, but the real driving force behind a country’s economy is small and medium businesses (SMBs). According to the European Commission, small businesses comprise 99% of enterprises in the EU and employ 48% of the workforce.
Running an SMB comes with a set of challenges like rising costs, fierce competition, and evolving market demands. Bigger enterprises with dedicated teams and huge budgets can overcome these challenges easily, but it’s quite difficult for SMBs with limited resources.
However, there is good news. With the right solutions and strategies, SMBs can tackle most of these challenges and stay competitive within their industries. Further, I’ll discuss the top 5 challenges small businesses face and practical ways to overcome them.
Challenge #1: Application Overload - Loss in productivity due to too many applications
Technology is evolving rapidly, and thousands of tools and applications exist for business telephony, messaging, project management, video conferencing, file sharing, CRM, and more. Even though each tool helps tackle different challenges, SMBs can struggle to juggle between multiple applications.
Most SMBs have a limited workforce, and an overload of applications disrupts their focus and hampers collaboration and productivity. Technology is meant to help business owners, but too many applications do more harm than good for SMBs.
How to Overcome This
-
SMBs should go for feature-rich applications that directly help with their operations in multiple ways. Instead of using a different tool for each thing, it is better to search for applications that have several capabilities and can help with multiple domains.
-
For example, with pascom, SMBs can combine all their communications from calls, chats, video meetings, and even faxes into one secure, hosted-in-Germany app, eliminating the need for separate providers. It is their one-stop, all-in-one solution for everything communication-related.
Challenge #2: Talent Acquisition - Hiring and retaining talented employees
A Goldman Sachs survey stated that around 89% of small businesses find recruiting qualified, talented employees hard. The workforce is the backbone of a successful business, without which an SMB can never scale and grow its operations.
Most individuals dream of working at a global enterprise and ignore SMBs. Also, sometimes SMBs succeed in hiring the right talent, but retaining them is a bigger issue.
How to Overcome This
-
Offering flexible benefits to employees is a great option even when the total compensation is lower. Individuals love remote-work stipends, compressed weeks, and wellness allowances.
-
Work on your SMB’s branding so that potential employees get to know about your organization. Use social media and employee testimonials to showcase your workplace culture, mission, and growth opportunities.
-
Highlight success stories of team members who have grown within the company to demonstrate career potential and attract top-tier talent.
Challenge #3: Demand Generation & Acquiring Customers
Around 43% of small and medium businesses fail because they cannot generate a stable market demand for their services and products. It’s hard for them to get consistent leads and turn them into high-paying customers for their business.
This issue arises because of limited marketing budgets, inadequate brand visibility, and competition from larger companies. If SMBs can’t attract and retain customers, then they are surely headed towards failure.
How to Overcome This
-
SMBs must use analytics tools to monitor conversion rates at each stage of the sales funnel. This way, they identify which marketing channels yield the best return on investment (ROI) and can allocate resources effectively.
-
Encourage existing customers to refer new clients by offering small discounts or credits toward future services. Implementing a referral program can leverage word-of-mouth marketing to expand an SMBs customer base.
Challenge #4: Cybersecurity - Securing business intelligence and data
As more and more enterprises are transforming digitally, hackers are coming up with new ways to hack them. Most big companies have advanced technical and security teams with strong security protocols and defense mechanisms.
On the other hand, SMBs are more vulnerable to cyberattacks and data breaches, which puts their business intelligence and data at risk. 43% of cyberattacks hit small businesses, which often lack mature defenses. Loss of customer trust and costly remediation can cripple SMBs.
How to Overcome This
-
PASCOM enhances business intelligence and data security through its ISO 27001-certified cloud infrastructure, ensuring encrypted data transmission for calls, chats, and third-party integrations. It employs daily backups, 24/7 monitoring, and regular penetration tests to safeguard user data, telephony records, and call recordings.
-
SMBs should require MFA on all user logins to protect against credential theft. Even if passwords are compromised, MFA adds a critical security layer, significantly reducing unauthorized access risks.
-
Conduct regular, short phishing-simulation exercises and update employees on emerging threats. This helps identify vulnerable departments and reinforce security awareness.
Challenge #5: Cashflow Management
Unpredictable cash flow remains a significant financial hurdle for SMBs. Over half of the enterprises struggle to cover daily operating expenses, and many cite uneven cash flow as a barrier to growth. Just like different productivity tools, SMBs should look out for an application that can help with this problem.
Late customer payments, seasonal sales fluctuations, and unexpected expenses can quickly deplete available funds. This makes it difficult to pay suppliers, meet payroll, or seize new opportunities. Without sufficient cash reserves or flexible financing options, even profitable SMBs can start facing a serious cash shortfall.
How to Overcome This
-
SMBs should shift from annual budgets to dynamic monthly forecasts based on their expenses and revenue in real time. This helps them anticipate cash shortfalls and allows for timely adjustments in their cash flow management.
-
They should establish low-interest lines of credit with banks or fintech lenders before cash crunches occur. Having access to funds in advance provides a safety net for covering unexpected costs.
-
Companies can offer small discounts for early payments and utilize digital invoicing tools to automate payment reminders. This strategy encourages prompt payments, improving cash inflow and reducing the time spent on collections.
Conclusion
SMBs face unique challenges in their day-to-day operations, but each challenge presents an opportunity for growth. Challenges like application overload, talent acquisition, supply chain disruptions, cybersecurity threats, and cash flow management are daunting.
However, with the right tools, cultivating talent, securing operations, and managing finances wisely, SMBs can overcome these challenges and continue their growth. We encourage all SMBs to improve continuously, overcome obstacles, and contribute meaningfully to their communities and the broader economy.