I think we can all agree that the statistics concerning the rates of small business failure are occasionally exaggerated, but this should not detract from the challenges facing start-ups in the current climate. Even moderate estimates suggest that around 50% of small businesses fail during their first year, which is a disturbingly high proportion of ventures.
Many of these failures are caused by universal business challenges, however, so by recognising these it is possible to safeguard your venture and lay solid foundations for future growth.
In this post, we will look at three of the most pressing challenges for emerging small business and how you can overcome them:-
1. Be smart when managing business overheads
Let’s start with the basics; as no successful business or startup can operate without investment. More specifically, the product or service that you offer will incur operational costs, which relate to elements including labour, materials and delivery.
While most businesses factor these costs into the financial planning, however, there a series of less obvious expenses that can be easily overlooked. Take energy costs, for example, which can fluctuate wildly but are crucial if you are to supply heat and electricity to your venture. Failing to budget for these costs (or chronically underestimating them) may ultimately squeeze your margins and hinder your initial growth plans.
To avoid this, you should strive to overestimate your business overheads when creating cost projections. This is particularly important when dealing with recurring costs such as utilities and rent, as inaccurate monthly estimates quickly accumulate over the course of the financial year.
Secondly, you should make strides to reduce the amount of energy that you consume and its cost. When managing your consumption of business electricity, for example, consider installing automated, smart metres that monitor usage data and identify opportunities to reduce your output.
2. Invest in creative solutions to scalability issues
Scalability is another key issues that small businesses encounter, particularly as they begin to experience growth in terms of demand. A lack of working capital or cash flow can prevent ventures from expanding in line with the level of demand for your products, forcing your business to stagnate and begin a prolonged period of decline.
This need not be the case; however, as there are now a host of creative solutions that enables small (and under-resourced) businesses to tackle scalability issues.
This is particularly true in terms of business premises, as firms no longer need to commit to a costly, long-term lease that becomes redundant once they begin to grow. From impermanent, pop-up retail outlets and temporary structures to virtual office space, brands can secure prestigious trading addresses without being forced to spend huge amounts. Similarly, outlets such as societyM offer access to serviced, external meeting rooms, ideal for start-ups that have no office space to meet clients.
Even if you do need to invest more in the expansion of your business, there are a number of innovative financial products that can deliver low-risk funding in the modern age. Factoring is arguably the best of these for small businesses who are looking to grow in line with demand, as it enables them to sell their accounts receivable to investors and secure invaluable capital (before repaying these amounts when specific invoices have been paid).
3. Leverage social and digital media to reduce your marketing spend
For small businesses that operate in competitive markets, the biggest challenge often revolves around raising awareness and gaining a viable market share. At the heart of this is a failure among SMEs to embrace modern technology (and more specifically digital marketing techniques), as while many understand the importance of this they are hindered by the perceived cost of implementation and a lack of expertise.
This issue can be overcome by the adaptation of social media as a marketing tool, however, as this integrated platform is freely accessible and can provide cost-effective channels that actively increase your ROI.
In simple terms, you need to start by building branded profiles on universally popular channels such as Facebook and Twitter. These platforms offer you access to a global audience, while the former has also evolved into a recommendation tool that enables businesses to build trust with customers. So long as you make an attempt to engage Facebook users with insightful, relevant and objective content, you can leverage this to build your market share.
Beyond this, be sure to tailor your integrated social presence to include sites that enable you to reach targeted segments. LinkedIn offers service-orientated businesses access to a professional audience, for example, while Pinterest is known to have a predominantly female user base (71% of account-holders are women). So, if you are selling products aimed at female customers, this channel can offer you access to a huge audience while providing a visual showcase for your ranges.