While SMEs are known to make a noticeable difference in providing employment and promoting the growth of industrialisation, according to the SME Chamber of India, small business owners face multiple challenges throughout their business lifecycle. This may be from lack of targeted marketing and financial management to timely expansion. Overcoming these challenges will help you play a big part in maintaining growth and consistently increasing your revenues.
Here are five issues every small business owner should tackle to record annual growth:
1. Managing cash flow
One of the biggest challenges common to SMEs is following cash flow guidelines that balance the outflow with the inflow. Regardless of your business’s profits, running your business becomes difficult if you don’t budget and plan your monthly business. A website development firm, for example, could finish a job in September, raise the invoice in September, but get paid only in October. This one-month delay can disrupt the firm’s fixed expenses, be it employee salaries, rent or other infrastructural costs.
Some solutions are to ask for partial advance payment on every sale or project, give a small discount to consumers for early payment. You can also make payment easier for clients by increasing payment methods, consistently cutting down on surplus expenses, and raising cash from idle assets. Keeping cash reserves that will support your firm during these times or taking a working capital loan will also help your business tide through these cash flow interruptions.
Additional Read: Reasons your business loan was rejected
2. Handling business accounts and taxes
Recording your business’s annual transactions is one thing, but managing them, learning from the trends and filing for taxes is another. In the interest of saving money, business owners try to handle this part themselves. This can cause problems like not accounting for tax payments or not being strategic about budgeting. The best way to tackle bookkeeping is by hiring a professional who has expertise in managing business records. Secondly, rather than calling an expert annually, set up regular meetings every quarter to be more informed. If your business is growing fast or has a variety of smaller clients with a large number of payables and receivables, it will be a good idea for you to hire an in-house accountant.
3. Staying competitive
Lower prices, better products, more convenient service—your business will always face a competitor who is sure to affect your market share. The challenge is to stay ahead of the competition and ensure customer loyalty. Identify gaps in the market that your competitors have not yet exploited and find ways to fill them. You can hire an experienced product developer to develop new products, change your product packaging or even employ a consumer psychology firm to market your firm in a more focused way. You can also think of new ways to sell your products, like establishing online sales for something that traditionally sells in brick and mortar retail outlets. Increasing consumer loyalty by offering loyalty discounts, gifts on a particular minimum purchase or free shipping above a certain amount are other ways to improve your revenue.
4. Marketing to the right consumer base
You may be spending time and resources on marketing your goods and services but find low conversions. When this happens, it is time to go back to the drawing board and relook at how to focus your marketing efforts. Rather than mainstream marketing that does not target your demographic, invest in market research to identify the right audience for your business. Study your target consumer’s characteristics and buying patterns, and use this information to market your firm smartly. If your consumers have different preferences and age groups, divide your marketing activities and target each set separately to boost sales. For example, you can increase your marketing spend on Facebook, which allows you to narrow down on your target by selecting a location, age group, and interests. You could create ads for each segment and talk to them rather than using the same ad across your demographic.
5. Tackling uncertainty
There is always a reason for market fluctuations, be it the recent demonetisation move or the new tax laws of GST. These uncertainties tend to affect small businesses more, who find it hard to adapt and evolve. Rather than letting uncertainty drive you to plan only in the short term, balance your reactive focus with long-term goals taking such fluctuations in stride. One way to do this is by hiring forward-looking employees in your business and not letting yourself get demotivated.
Set targets for productivity, have your marketing team develop new promotional activities, and give your R&D team the directive to evolve product offerings to stay relevant. Ensure that you also have the finances you need to support your business during uncertain times by identifying a convenient business loan.
These are the common challenges faced by small business owners. Knowing these common challenges and finding the most suitable solutions for them in advance is half the battle won. If you implement the solutions correctly, your small business will be well on the way to success.
Additional Read: Funding options to raise capital for your business
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