September 03, 2020
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August 07, 2020
August 03, 2017
What distinguishes a small business from a larger enterprise is the number of employees—while large companies generally support more than 1,000 employees, small businesses have 100 or fewer, and mid-size companies have between 100 and 999 people. Why is it important to designate small businesses separately from larger organizations? One of the primary reasons is that they face different challenges. Yet many of the most common challenges that small and medium businesses (SMBs) encounter are completely avoidable if you’re proactive.
Here are five top challenges that SMBs often run up against, and how to overcome them:
Challenge 1: Dealing with new hires. Larger organizations have greater human and financial resources to hire new employees, which is critical to growing the business. Smaller organizations are often cash-strapped, at least initially. This can make it tougher to allocate needed funds for onboarding when all factors—from benefits and equipment to training and taxes—are considered. One approach to manage this issue is to plan for slow growth. Rather than hiring several new employees at once, spread out your hires over a longer period to improve your chances of a high return on human capital.
Challenge 2: Becoming and staying profitable. SMBs may have problems with cash flow that can hurt quarterly and annual profits. Money issues might be related to delayed client payments, outstanding bills, and/or equipment needs. Figuring out ways to increase profits is a complex task that involves continuously innovating to beat the competition. Beyond ongoing product and service optimization, however, you can use software tools to help with money management to decrease the chance of going too far into the red without making changes. Tools such as spreadsheets can help with everything from budgeting to advanced modeling functions to help small businesses improve their financial forecasting ability.
Challenge 3: Becoming dependent on a key client. Small businesses—particularly those with fewer than 50 employees—can quickly find themselves in trouble if they put too many of their eggs in a single client’s basket. If your business relies on one client for the majority of the company’s income, it’s clear that problems will arise should you lose that business. While it may not be simple for smaller, more niched businesses to widen their client base (particularly in the early stages of growth), it’s important to work on client diversification. If you want your small business to grow and thrive, you must avoid overdependence on your current key customer. Keep a strong marketing initiative going to attract new clients even when you feel that the team doesn’t have time for it.
Challenge 4: CEO fatigue. Just as SMBs are often too reliant on one client, they also may depend too much on the company founder or leadership team to stay afloat. Key company executives will of course need to take on greater responsibility during the launch phase and early years of a startup, but the business risks burnout if these leaders continue to shoulder more than is humanly possible for too long. The solution here is to successfully manage Challenges 1-3 above, ensuring that new staff join at a reasonable rate to help relieve workflow burdens, and are able to help the enterprise stay profitable by collaborating with a wider range of customers. That way, the founders and CEO won’t find themselves running out of steam before the venture has a chance to reach its stride.
Challenge 5: Not enough time in the day to complete objectives. When you recognize the toll that the challenges above can take on SMBs, it helps crystalize why employees working for smaller organizations may always feel like they’re racing the clock and losing. Even when putting in the long hours required of a startup, those who work for small businesses—employees and founders alike—may find themselves struggling to keep up with everything there is to do each day to keep the business solvent. This is another area where spreadsheets can help via productivity tools. SMBs can design their own time management system using the formulas and functions available in spreadsheets, creating visual representations of hours allocation using built-in tables, customizable charts, and what-if analysis functions.
Creating goals – and designing a strategy for successfully achieving them – is of course, essential to overcoming the challenges that SMBs face. Here are some practical suggestions to keep in mind:
Tip 1: Make goals trackable. Resolving to “improve your marketing initiative” or “increase profits” may point you in the right direction toward areas that you’d like to improve, but the problem with simply stating goals as resolutions is that there’s nothing actionable, measureable, or trackable about them. To increase your chances of successfully reaching your desired outcome, it helps to set specific milestones that you can tackle en route to your ultimate goal.
Tip 2: Give it a deadline. Don’t make the mistake of leaving your goals open-ended. For example, a goal such as “I want my business to become more profitable” doesn’t tell you anything about the timeline for achieving greater profits. Instead, be specific by giving your goals—as well as the steps needed to achieve them—definite deadlines.
As with the strategy above, the more accurately that you can quantify your goals, the better chance you’ll have of achieving them. So for the profit-increase example, you might want to target hitting a 5 percent increase by the end of each quarter.
Tip 3: Write an action plan. By committing your step-by-step goals to paper (or better yet, office software tools such as spreadsheets or word processing apps), you’ll be helping to hold yourself accountable. Use spreadsheets to set up your own formulas and functions by categories that correspond to your specific goals. Spreadsheets allow you maximum flexibility to organize the steps in your action plan and assign goals and other variables to them. You can even use advanced modeling features with what-if analysis functions. This allows you to improve your forecasting ability, which is particularly useful if your goal is complex and data-driven.
Understanding the challenges unique to SMBs is half the battle to overcoming them. Armed with tips and tools that support your goal setting and tracking, you should be well on your way to growing your business and achieving success.