Top 11 Business Challenges Every Small Business Faces (And How To Solve Them)

As a small business owner, you’ve come to realize that starting a business, although difficult, is hardly the toughest part of owning a business.

No, the more challenging part is the daily struggles that come with growing and nurturing your business. In fact, you might be wondering whether you’re running a business or simply just trouble shooting problems on the daily.

But you’re not alone, and that’s the main premise of this post. I thought I’d share some pressing challenges that the over 30.7 million U.S. small businesses face every day.

That way, you’d understand that you’re not alone, and that having to constantly solve problems, do more with less resources, and put out fires, is more normal in many small businesses than you’d think.

Even more, you’ll see discover that many of these problems can be fixed, if you’ll take a step back, dig into why the problem is happening, and refine your strategy to better reflect what you’ve learnt the first time around.

Here are the various challenges that small business owners face, plus some actionable insights on how you can tackle them.

Typical Small Business Challenges

1. Funding

2. Getting Clients and Customers

3. Differentiation

4. Expansion and Growth

5. Hiring Smart Talent

6. Getting Paid on Time

7. Owner’s Constraints

8. Mandatory Business Expenses

9. Establishing Documented Processes

10. The Broader Economy

11. The Need to Always Be Selling

1. Funding

As the saying goes, “it takes money to make money”, in order to start or grow, small business owners constantly worry about how to raise funding or money to start or scale to the next level in their business.

And this is especially challenging during those early days when customers and clients don’t know you yet, and you’re almost hoping that the market would like what you bring as a business, yet you’re pouring hours, money, and energy into getting your small business off the ground.

How to Solve It:

The first step to handling funding in your small business is to pay more attention to it. Realize that, if you don’t tackle it at the early stage of your business, it might become a monster that could mean more troubles down the road.

Next, know that you don’t need to go into loans or raise funding at high interest rates in order to start or run your small business. One of the biggest benefits you have as a small business owner is that you can be scrappy by nature. You don’t need to buy billboard ads, get approval from the Board, or worry about shareholders; problems that big companies face.

This means that you can afford to go slowly but steadily. For example, if you’re starting an auto repair shop, don’t think you need a lot of money to get the parts and equipment on Day One. Instead, consider working with an established auto care shop at first, let family and friends know that you’re available to fix their cars, and don’t underestimate the power of word of mouth in the early days.

That way, you’ll strive to put in the very best into your work, which would mean more referrals for you, which would mean you can start your business with no debt right from the start. This gives you the peace of mind to keep your costs low, do excellent work, and watch after every single cent that comes in and out of your business.

In other words, let debts or loans be your last line of help as a small business owner, and not the default source of funding for your small business.

Just like with your personal finances, your small business would grow not because of how much money you can make, but how much you can keep and re-invest back into your business.

2. Getting Clients and Customers

Having too many clients and customers as a small business owner is definitely a good problem to have, and companies, small and big, struggle with this. I mean: you don’t have a business, until you have paying customers, and it’s always a tough battle, for small business owners especially, to keep those leads coming and the phone ringing, every single day.

So how do you keep getting customers as a small business owner, when you can’t afford to place billboard ads or spend thousands of dollars in TV commercials?

How to Solve It:

First, understand that getting clients is the major reason why your business will fail or succeed. In other words, you can’t expect to just do good work, and expect customers to start falling over themselves to buy from you.

You might have enjoyed word-of-mouth referrals and not have had to look for customers, but business is changing and the market is getting more competitive. If you’re not constantly thinking about how your business will get customers, start now.

Second, be clear on who your ideal clients are. If you try to target everyone, you’ll end up convincing no one. Figure out the perfect customer for your business, why they need you, and how you can best communicate what you do to them. This activity would help you understand how your customers find you, and how you can also find them.

Because finding customers is a task that you never ends for you as a small business owner, I thought I’d list several ways to get in front of your ideal customers and make them aware of your business:

  • Find out where your customers hang out online and start sharing content that solves their problems, in a way that leads them to your business.
  • Don’t discount the importance of building your brand as a small business owner. Constantly build relationships with local reporters, influencers, news outlets, and brands who have the attention of the ideal customers that you’ll love to do business with.
  • Maintain a top-notch blog for your business. If no one’s blogging in your industry, that’s even a stronger signal for you to take the lead and dominate your market. If everyone business is your industry seems to be blogging, you still need to blog. Blogging is hard, and the businesses that make it a priority will always win. If you’re struggling with what to blog about, take every question that your ideal customer might have about your business, and start answering it honestly and candidly with your blog posts.
  • Build an email list. As you start to blog, you’ll start getting trickle of website and blog visitors at first, as readers land on your website based on your blogging efforts. Don’t let them leave your website without getting their email address. You’ll be sending periodic emails to them – answering their questions and getting to know them, beyond just being mere visitors on your websites. This is how you’ll consistently connect and build relationship with them. That way, they’ll grow to like, trust, and connect with you too… which is the holy grail of getting consistent clients and customers.
  • To grow your email list, you just need to ask for visitors’ emails on your website. If your visitors find value in what you’re blogging about, they’d want to learn more and stay in touch by giving you their email address. So, don’t feel bad about asking, so far as you don’t stop delivering value to them.
  • Be obsessed with lead generation. Lead generation simply means: monitoring how your ideal customer finds you for the first time, until they buy from you again and again, and everything that happens in between. In other words, you need a plan to convert your prospects to customers. And one of the most valuable tool to do this is with your website. Focus on making your website a powerful lead generation tool and, with time, you’ll have more quality leads than you can handle.

3. Differentiation

If you’re not different in your market, you might as well not exist.

Whether you like it or not, as a small business owner, your customers are constantly asking themselves: why they should be buy from you, not the other guy or gal down the street.

You need to make it easy for them to know what makes you different. Otherwise, you’ll constantly have to fight for customers with your competitors and, for example, constantly have to offer the lowest prices.

And no matter how competitive your industry is, you can always find strategies to be different and unique in your space.

How to Solve It:

There are many ways to differentiate your small business, but the six I’ll touch on here are by target market, faster and better results, incredible offers, authority or thought leadership, honesty and transparency, and easy access.

  • Focus on a target market: If everyone in your industry is trying to get customers from everywhere and anywhere, an excellent way to stand out and be unique is to find your own sweet spot and audience in the bigger market that you can cater to. This will not only make your marketing clear-cut and impactful, it will also bring you loyal customers who come to you because they feel your business is specially meant for them.
  • Be known for faster and better results: You’d think every business owner wants to get better results for their clients, but that’s simply not the case. In fact, you’ll find out that if you can persist and focus on delivering your best to every customer that you have, you’ll come out ahead of your competitors in your market space. If you find out that your prospects want faster results that solve their problems, that might be your opportunity to differentiate yourself. Take some time to understand exactly why your prospects want faster results – don’t just assume everything has to be hard, difficult, and painful for them to achieve success with your business. Spend some time brainstorming, and since no one is hardly doing the thinking, you’ll be far ahead with what you’ll discover to help your customers get faster and better outcomes.
  • Come up with incredible offers: No, this doesn’t mean offering lower prices. If you’re a service-based business, think of ways to turn parts of your services into products that you can then offer for sweet deals. By doing this, you’ll be able to get creative and stand out, while also getting paid more, since you won’t be charging by the hour for your time. Make it hard for your ideal clients to say no. If you’re sure of the results you promise with your product, offer a money-back guarantee. If you’re selling a monthly subscription, offer a test trial for the first month either for free or at a ridiculously lower price, so your ideal customers can get a taste of the pudding.
  • Be known as an authority in your field: Every day, we see the amazing power of authority in action. Your dentist is an authority, so you hardly doubt what she tells you to do. When you have authority in your market, you become responsible to your market and people highly value what you say. To establish yourself as an authority, share what you know on a consistent basis with your ideal prospects, and demonstrate that you care more about solving their problems than collecting their money. Soon enough, you’ll become the expert that gets all the attention and business that you didn’t even ask for.
  • Be honest and transparent: If you find that a lot of scams and snake oil sales men exist in your field, swindling people out of their money, resist the temptation to go for the ‘quick buck.’ Rather, let that be your cue to stand out and offer transparency to your customers – they won’t forget. If you sell a product, be upfront about the side effects and who would benefit most from it. Sometimes, your prospects need a solution but not what you’re offering. Don’t shove your stuff down their throat. Be honest with them about what will really help them, and you won’t regret it.
  • Easy access: Does your business need to work with customers after they’ve bought your product? Then, you can be the one that offers easy and convenient access for after-sales support. Most business owners care about the sale and quickly move on to try to close the next client, but you can be that business that makes sure that its clients are truly happy. You can refine your business model so that prospects and clients find it easy to do business with you. Have an active cell phone line, engage with your customers using Facebook Groups / Pages, be available to answer their questions. When you’re easily accessible like this, you’ll differentiate your business. Not only that, you’d stand a better chance of winning customers and fans for life, rather than having to constantly run after new prospects. In fact, studies show that acquiring a new customer is five times as expensive as retaining an existing customer.

4. Expansion and Growth

The dream of every business owner is to succeed, continually grow, and do better year-over-year. But the challenges bordering on growth is a common concern that keeps small business owners up at night.

You don’t want to grow too soon, and have to overstretch your health or finances, fire staff, or worse, shut down your business. On the other hand, you don’t want to wait too long to scale either, else you might be innovated out of business by competitors. Such a dilemma for a lot of business owners.

How to Solve It:

Although there are no perfect answers here, but it’s often smart to make business decisions based on your customers. Are you overwhelmed with new quality leads and you’re struggling to keep up? Then it might be a good time to get a helping hand. It’s often a good idea to hire a virtual assistant or freelancer at first before you think about bringing in someone full-time.

But before you start looking into hiring, ask yourself, what would the new hire do? Have you taken the time to document the processes that they’ll be helping you with? Most times, small business owners feel overwhelmed not because there’s too much to do, but because they’re juggling too much in their head.

Sit down and write out processes for the major tasks in your small business, and identify those areas where you struggle to keep up, either because you have weakness in those areas, or your energy is better spent on other aspects of the business. Your goal here is to “take yourself out of the business”, and see what happens.

In other words, if you’re unable to come to work on your business starting tomorrow morning, and you need to hand over everything to someone else, what notes would you write today, so they know what to do once they come in tomorrow?

Once you have these processes written down in notes, focus firstly on those that affect how you serve customers. Bringing in and delighting customers are your two core duties as a small business owner, and if you find yourself struggling with doing either, it could be a good sign to bring in someone else who can take the load off your shoulder.

In all, as you look into scaling, keep your focus squarely on the two key areas of getting and delighting customers. Some roles might be nice to hire for, but ask yourself, “Will this role help me get more clients or delight more clients?”. If no, consider holding off on that hire, and direct all of your attention on those two key areas.

5. Hiring Smart Talent

Big companies can make mistakes with hiring, and bounce back from it, but many small business owners are worried they’d make the wrong hire, and so they put off hiring altogether.

Even more, a lot of small business owners struggle with giving up some of the tasks they do to a new hire, and worry the employee might do things the wrong way, piss off customers, and ruin their business!

These are legit concerns because hiring and firing employees are both very expensive endeavors, especially for a resource-constrained small business owner.

How to Solve It:

Take your time to do your homework. You need to be clear on three key things: process, the candidate, and your vision / work culture.

  • The Process: Do you have a very clear idea of what your new employee will do? If not, write out the processes needs to be done, tailored to your specific business. Then conclude with how the process will make your business grow. Don’t hire just because you think it’s time to hire and resist the urge to use a boilerplate job ad to recruit for your business. Make sure there’s a real vacancy that needs to be filled in your business. Otherwise, you and the new employee might end up confused and lost on what to do to actually help you and make your business grow
  • The Candidate: You can have the best job description for your role but if no talented prospects are applying, then the job ad won’t amount to much. Use the process that you’ve developed to look for the candidate. Don’t settle for an average candidate based on the tasks, wait it out until you find an excellent fit for your business. A useful hack to help you skip this wait is to consistently hang out where your ideal hires might come from. For example, write on blogs or go on podcasts where your ideal employee hangs out. So that when it’s time to hire, you’ll have awesome connections and candidates to reach out to. You want a candidate who can do the work, and also displays a “can do” attitude, to do what needs to be done, at all costs.
  • Your Vision / Work Culture: What vision do you have for your business? Where do you see your business going in a few years time, and what kind of work environment would help you get there? These are questions you’ll need answers to as you plan to hire a new employee. Because here’s the deal: you might have been unclear about your vision when the business was just you, but as you add more people to your team, you’ll want to make sure everyone on the bus is in their rightful sears, and going to the same destination. Having practical vision and work culture statements will help you achieve this, so you can steer the bus in the right direction as a small business owner.

6. Getting Paid on Time

You might have done the best work ever for your clients, but if they don’t honor your agreements and pay on time, it could hurt your small business.

Unfortunately for a lot of small business owners, this is not a hypothetical situation – it’s something that happens to them quite often. Whether their clients themselves are struggling to get paid or the economy is just not in a great place, many small businesses feel the pains of missed or delayed payments on the part of their clients.

How to Solve It:

Try to understand your client X or customer Y has not been regular with her payments. It might be negligence on her part or it could be due to circumstances that are hardly in her control.

As you understand why they’ve not been paying their bills, it’d be a good idea to see if you can diversify your client base. Often times, it could be that your business has come to be over-reliant on a single client, and the actions of that client can determine whether your business will make a profit or a loss every month.

This is not a good spot to be in as a business owner, which comes back to the need for you to consistently oil your lead generation machine, so you don’t have to rely on one single client to keep your business running.

On the other hand, your clients may not have a choice than to pay you late – perhaps due to the nature of their market. If you find that clients who delay their payments eventually pay without fail, say three or six months after you’ve worked with them, then consider setting up your business finances so that you don’t expect that money to come in the next month.

If they pay every six months, be prepared to not account for that money in your business budget for the following month, and put processes in place to make sure you don’t forget to collect the payments.

Better still, you can throw in some incentives to motivate your clients to pay you in time. Because according to the principle of the Time Value of Money, the $1,000 you have now is worth more than the $1,000 you’ll have in the future. Why? Because since you run a business and your money can earn interest, any amount of money is worth more the sooner you can get it.

7. Owner’s Constraints

Many small businesses, by nature, thrive or die by the owner. For example, if you suddenly fall sick or break a bone today, would your business be able to function at full capacity tomorrow morning? For a lot of small business owners, the answer is “No.”

That means, the small business is constrained or limited by the efforts of the owner. Which makes sense, since most small businesses are resource-constrained and might not be financially wise for them to hire employees at will.

How to Solve It:

First, watch your health. If you find that your business still relies on you a whole lot, it’s even more important for you to take care of your health. Because here’s the deal: your health, in this case, is directly related to the health of your business. And if you fall sick, your business might be battered because of it. Use routines to work hard, relax, and get enough sleep.

Watch what you put eat, drink, and what you put into your body. Always make some time in the day to exercise and get your blood flowing. You can start by walking 11 minutes a day, and even later increase that to 35 minutes, in order to combat the harmful effects of sitting all day.

Work with a business mindset coach to help you get out of your own head, get back your focus, clarity, and productive boost; and remove the mental barriers that are hurting you and your business.

Second, remove yourself from your business. I understand that this might sound scary if your business is practically your identity and part of what makes you, you. But emergencies happen when we least expect it, and so take some time to document your business processes so someone else will know what to do, in the event that you’re unable to work.

Don’t overwork yourself, thinking you’ll get more results when you work 15-hour days. Find the few tasks that truly move the needle for your business, and make sure to focus on those early on in the day. As the day goes by and you start getting tired, you can then switch to tasks that require lesser mental power. Lastly, work on your business, and not in your business.

8. Mandatory Business Expenses

If you’ve hired ten full-time employees, then the salaries and benefits of those ten hires are mandatory business expenses that you have to incur every month. Many small businesses have died a fast and painful death because the owners hired too much, too fast, or hastily took on excessive overhead expenses like rent, office supplies, employee salaries and benefits, and vehicle insurance.

You might think you only need to pay $4,000 a month to hire your new employee, but have you factored in the costs of their benefits, health insurance, recruiting, training, hazard allowances, etc?

This means that whether you earn $0 or $5,000 in business income this past month, you’ll still have to pay all of those mandatory expenses. That’s just not sustainable, and it’s definitely no way to run a business. Because soon enough, you’ll run into debts, have money nightmares, have to fire staff, and might ultimately need to shut down your entire business.

How to Solve It:

Don’t bite off more than you can chew. Question every single business expense that you make. Do you really need to hire more staff, rent that new office, or get those two new business vehicles? Chances are, you don’t. Err on the side of caution and always do what’s in the best interest of your business, long-term.

It’s never cool to buy fancy stuff you don’t need for your business. Running a small business is hard enough, don’t make it harder for yourself by trying to impress people or customers who couldn’t care less with unnecessary business expenses. Your small business will thrive not necessarily because of how much you make, but how much you can keep.

For example:

  • Instead of hiring a full-time employee, why not use a virtual assistant?
  • Instead of bringing in workers full-time, why not work with a contractor company to use their staff on an as-needed basis?
  • Instead of renting a new office, why don’t you keep working out of your home, from your kitchen table, and take client meetings at the nearest Starbucks?
  • Instead of getting a new truck for your business, why don’t you lease one? [If you absolutely need to get a truck for your business]

The more expenses you acquire, the higher the pressure to earn more business, work with any type of client that might not be a fit for your business, and the higher your chances of going out of business.

If you consider that: 50% of small businesses fail in their fifth year, according to the Small Business Administration (SBA), and the biggest risk to the survival of any small business is running out of money; then you’ll see why it’s so crucial to save, bootstrap, and live to expand your business another day.

9. Establishing Documented Processes

It’s one thing to bootstrap and make every dollar count in your small business, but it’s another thing to not have documented notes for every process that powers your small business.

Just as writing your thoughts on a piece of paper gives you clarity, documenting the many business processes you use every day brings clarity to your business. As a small business owner, you might know everything there’s to know about running your business, but God forbid, what happens if you fall sick or have to step away for a while?

How does the business go on without you at the wheels?

How to Solve It:

The solution is to get out your knowledge onto documents that your new hires or anyone you delegate can use to run your business if you need to step away. These documents will serve as your proxy and make sure everything continues to run smoothly in your business while you’re away.

10. The Broader Economy

You can provide the best service in town, but there are a few factors that could hurt your small business, but are also not entirely in your control. And one big factor is the state of the economy around you – which could be local, state-wide, national, or global economy.

Virtually no one was ready for when COVID hit in 2020, and many small businesses either struggled or went out of business because of the ripple effects of the pandemic on our economy.

As small business owners, we can do everything right, but the fact remains that: since we still operate within the economy, negative economic conditions might threaten the survival of our business.

How to Solve It:

Every business will be different, but you’ll want to study the industry in which your business operates and see how you can reduce the impacts, in case the economy goes south for a while.

If you operate in a sector where government regulations are still evolving, cannabis for example, start thinking of ways to build resilience into your business, so that any economic or political earthquake will not crush your business.

For example, having a strong online presence for your business is no longer a luxury. It’s now a necessity. You have no excuse to not be online. During the COVID pandemic, for example, many small businesses had to move entirely online and it was either you were online or your business never existed.

It’s far easier now for your business to be online – get a website design agency to design a website for you, write regularly on your blog, and get an online following by sharing your message on social media.

Collect emails of those who visit your website, and run a newsletter to regularly keep in touch with them with helpful resources related to your business and special offers that relate to what you sell.

11. The Need to Always Be Selling

Many entrepreneurs started out as hobbyists, and with time, found a market for what they make. For example, you might simply enjoy making jewelry pieces, and eventually place a few items on Etsy just for the fun of it.

But as every small business owner soon realizes, being the best doesn’t necessarily mean you’ll always have clients and customers. You’ll need to constantly be putting yourself out there, selling what you offer, and convincing prospects why you’re the best fit for them.

Sales can sometimes be unsexy and not cool, but there’s practically no business if you’re not selling your products or services. Business owners know they need more leads, and they sometimes don’t appreciate that they constantly have to sell their stuff in order for their business to continue to do well.

How to Solve It:

Find a method of selling that works for your business, ideal clients, and interests, and stick with it. For example, you might not enjoy knocking on doors or actively pitching prospective clients, but you can embrace Facebook Groups, Twitter, Google Ads, or local SEO to drum up leads for your business.

Find out what gets results for your business and double down on it. Ideally, your selling method will be very effective if you can sell your products in places where your ideal customers hang out, and you enjoy that process.

For example, the selling method for your local dentist practice will be very effective if your ideal clients listen to podcasts and read blogs, and you enjoy running a local teeth-care podcast focused on your community. Afterward, you can turn the audio notes from that podcast into written text that you can then share on your blog each time you release a podcast episode.

The need to always be selling might be concerning to you at first, but if you keep getting your ideal clients because you’re constantly selling, then you might like the process more, since selling pretty much puts money into your business and help your business grow.

So, you might not enjoy having to sell every time, but if you like the results in the form of more money that selling gets you, then you’ll be more motivated to keep selling your products.

Running a small business might be the hardest thing you’ve ever done, but using solutions like the ones above will help you overcome the challenges you face as a small business owner, and make you last long enough to reap the awesome rewards of entrepreneurship and building a thriving business.

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