7 Biggest Challenges SMEs Face and How to Overcome ThemWritten by Marya Sutimi on June 21, 2021
We often hear that small and medium-sized enterprises (SMEs) are the backbone of the economy. In the USA alone, around 49.2% of the workforce is employed by small businesses.
While it looks promising by number, SMEs often have to face challenges and overcome them in the early stage of their business. After all, it is not an easy task to start a venture from scratch.
Try our online invoicing software for free
Accept online payments with ease
Keep track of who's paid you
Start sending invoices
So, what are the biggest challenges that most SMEs have to face, and what can you do to overcome them in the early stage of your business?
1. They Have No Clarity In Their Business Plan And Strategy
Planning ahead is essential, no matter what you do. Creating a thorough business plan can be a foundation for your business to outline the strategy. It will help you to identify the key strategy for your business, and how you can implement it.
It is possible to jump right into starting your own business and wing it. However, there may be some critical benefits that you miss out on if you have no clarity in your business plan and strategy.
Having a business plan may not predict the future of your business accurately, but you can work on the core strategy of how you want your business to operate. It will be challenging to track your progress and make an adjustment without a business plan.
Outlining a clear plan for your business will help you make strategic decisions that can be a game-changer for your business.
Tips For Writing a Business Plan for SMEs
There are free business plan templates available that you can use for your SME to get started. The goal is to get it done so you can focus more on how to grow your business.
Here are some tips that you can try out when you write your business plan.
- Keep it short and straightforward, as this is something that you’re going to use as an indicator of your business progress.
- Identify your target audience. Write your business plan with the terms they will understand.
- Test and review your business plan. Before you established the final plan, you may want to check the viability of your idea before launching the business.
- Plan out your strategy ahead. To make it easier to track the progress, you can design a 3-year plan and break it down into 12-months objectives that are possible to achieve.
2. They Struggle To Find The Right People To Grow Their Business
Ideally, SMEs will need a team to make sure all functional aspects of their business are properly delivered. These include sales, marketing, production, and operations.
Having a great and supportive team can help a business owner to focus on the other core strategies for their business.
If budget is your concern, you can also hire a virtual assistant to help you with various tasks at the beginning. As your business grows, you can get more people on board with relevant workloads to ensure the operation of your business activity.
Tips For Hiring the Right Team for SMEs
A supportive team is one of the most crucial elements in a business, especially for small and medium-sized enterprises. Hiring the right people to grow your business not only helps you lead to success, but their support can also conserve the costs and drive growth for the business.
Here are some tips for finding the best candidate for every position you need to fill in for your SMEs.
- Be specific with the tasks you assign for their role and outline your expectations from the candidate with the skills they need to have for the job.
- Add the hiring process in your schedule to devote the time and the place for the meeting and interview.
- Speak to other business owners to see where they got the best people for their company. You can also take some time to search through LinkedIn to pitch an experienced professional that may be suitable for the position.
- Consider hiring them on a contract basis before getting them on board. Otherwise, you can also offer a paid trial to see how they fit the criteria to fill the position.
3. They Have Limited Financial Sources For Their Business
From access to funding to inconsistent cash flow, financial challenges remain one of SMEs’ top obstacles.
While applying for business credit is more accessible these days, it is also essential for SMEs to understand that there are more ways to secure their business finance through multiple sources.
Tips For Securing Multiple Sources of Finance for SMEs
While it is less risky when you use your personal savings to start a business, there are some strategic ways that you can implement as a part of your financial plans.
Here are some tips that you can consider if you’re planning to secure more sources of finance to scale your business moving forward.
- Having good personal credit will benefit you, especially if you want to secure the finance for your business through a business loan.
- Provide a realistic business plan, and add the details. If your business is ongoing, you can also include the current situation of your business.
- Consider various sources of funding. Whether creating a creative loan structure for friends and family to investing in your business or signing up on a crowdfunding website, it’s always good to have a contingency plan.
4. They Haven’t Streamlined The Proper System For Their Business
Many SMEs don’t have their systems and process in place until they start running their business.
However, streamlining the system will do wonders for your workflow. Not only is it easier to coordinate with your internal team, but it will also help your customers understand what and how to expect from your product or services.
Putting up a system for your business shouldn’t be difficult. With the recent technological advancements, you can rely on digital support to help you with the daily operations of your business.
Tips For Setting Up a Proper System For SMEs
You can go digital for almost every task for the business, from invoicing software to project management tools.
In order to streamline the systems for your SME, you can categorize them into three activities in your business: operations, sales and marketing, and finance.
Here are some tips to help you create a system for the business that boosts your productivity and efficiency.
- Structurize your system according to your business activity.
- Break it down into several categories, which include the process (how to do it), the tools (what to use for it), the people (who will be responsible for it), and the strategies (how they will do it).
- Refine the system, and improve it from time to time.
5. They Struggle To Convert Their Audience To Paying Customers
For SMEs, getting customers can be challenging. However, there are many channels you can try out to reach the potential market for the business.
Create your customer persona first to identify your ideal target market. Start doing your research about what they like, their buying power, and where you can reach out to them to introduce your products and services.
It’s important to understand that you are not everyone’s cup of tea, and neither should be your business. Streamline your marketing plan that is targeted to your ideal clients, and start from there.
Tips For Getting Customers for SMEs
Gaining your customers’ trusts is one way to get more customers for your business. There are multiple ways you can try to gain more exposure and reach more ideal clients for your SMEs.
- Recognize your unique selling point compared to your competitors, and highlight it in your marketing strategy.
- Encourage your existing customers to leave a review or testimonial.
- Create a referral program. It will help you retain your customer, with a chance to expanding your business’ exposure through recommendations.
6. They Aren’t Sure About The KPI For Their Business
Identifying the key performance indicators can be one of the most challenging parts for SMEs.
Most will start by measuring sales revenue and their profit every month, but it takes a lot of trial and error process to understand what works for your business and what’s the next strategy you can implement from knowing your metrics.
Identifying the key metrics for your business will help you focus on the target you’re aiming to achieve. At the same time, the metrics will be useful in case you need to pivot or restrategize.
Tips For Creating the Right KPI for SMEs
To identify the right KPI for your business, you can establish some categories that can be used as the indicator for your business activity. These include:
- The business goals and objectives.
- The current business stage.
- The tools used to track your KPIs.
7. They Have to Face Unforeseen Obstacles That Can Damage Their Business Operation
A few years ago, no one could predict how the pandemic would hit and affect the economy to the lowest point in the last decade.
Let alone SMEs, even big corporations struggle financially due to the unforeseen situation last year. The majority of businesses have to recreate their business models due to the sudden change in this climate to make sure that they adjust to the current situation.
Unexpected obstacles like the pandemic will require an effective backup plan for the business. It will be challenging, but it is possible to cope with the change.
Tips For Thriving From the Unforeseen Situation for SMEs
It is important to keep in mind that any potential obstacles can come across and affect your business. Having a robust backup plan can ease the pain. However, more often than not, you need to adjust to minimize the damage.
Here are some ways to adjust your business when you face an unexpected situation.
- Be resilient and flexible. A setback is expected in the business; adapt when needed or restrategize your business if you must.
- Cut down the cost to minimize significant expenditures that can hurt your cash flow.
- Diversify your income resources.
Those are the biggest challenges that SMEs face and ways to overcome them for the business. Having setbacks in your business can be difficult, but how we face and solve them that matters.