Top 10 Challenges facing Small to Medium Size Businesses

Small and medium-sized enterprises, or SMEs, play a significant role in the global economic landscape. These organisations serve as pivotal contributors that create jobs, foster innovation and drive economic growth. However, if you’re the owner of a small or medium-sized business, you’ll also be well aware of the many challenges for SMEs, which can impede growth and expansion. This is particularly the case in the current economic environment, characterised by heightened inflation and interest rates, supply chain disruption and geopolitical challenges. Here, we take a deeper dive into the top 10 issues facing SMEs in 2023.

1. Access to capital

One of the biggest challenges for SMEs is accessing capital. This is particularly the case for smaller businesses, with banks and other financial institutions often adopting a cautious approach to lending these businesses money, driven by reservations about their size and risk profile. This can make it challenging for small businesses to invest in new equipment, hire employees or expand their operations and means shareholders are often required to use their own assets as security for any borrowing.

2. Cash flow management

Cash flow management is crucial for SMEs. If you’re a business owner, you’ll need ensure your business has adequate money to cover its expenses and invest in growth. Preparing a budget and forecasting cashflows is key and should assist you with planning. Late payments from customers, unexpected expenses and fluctuations in revenue can all impact on your cash flow. This is exacerbated when inflation and price pressures affect your key inputs.

3. Competition

SMEs face intense competition from other businesses. Competing with larger companies can be particularly challenging, as they often have more resources and established brands. As the owner or manager of an SME business, you’ll need to find ways to differentiate your business and establish a foothold in the market.

4. Talent management

SMEs often have limited resources and significant competition from larger organisations, making the hiring and retention of skilled employees an uphill task. It can be challenging for you to offer competitive salaries and benefits compared with these organisations. Instead, identify your business’s strengths, particularly those that benefit your people and potential employees, and focus on these strengths in your hiring and retention strategies. For example, if your business has a great culture, you could use this as a focal point in your job ads and could provide testimonials from staff on your social media channels.

5. Regulatory compliance

SMEs must comply with and navigate various regulations and laws. This can be expensive and time-consuming as you’ll need to ensure you’re meeting tax and employment regulations. You also need to comply with any industry-specific regulations. To streamline the process and ensure compliance, it’s wise to engage a professional such as an accountant or a lawyer to assist.

6. Digital transformation

Digital transformation can be one of the key challenges for SMEs, particularly if they lack the necessary resources and expertise SMEs must adapt to digital technologies to stay competitive. Exploring the implementation of new technologies like cloud computing or e-commerce can help you to reach new customers and increase revenue. Moreover, automation can in some cases increase the speed and efficiency of your operations. Treat digital transformation as an opportunity rather than a challenge.

7. Marketing and customer acquisition

SMEs need to invest in marketing and customer acquisition to attract and retain customers. The key is focusing on how you can develop a strong brand and overall marketing strategy. This could mean investing in external help to reach new customers and build your brand.

8. Managing growth

Rapid growth can be a double-edged sword for SMEs, bringing both new opportunities and challenges. Managing cash flow, hiring new employees and scaling operations can all be challenging, so it’s imperative you plan for growth and ensure you have the resources to navigate this growth effectively.

9. Cybersecurity

Like all businesses, SMEs are vulnerable to cyber threats. However, many lack the resources and expertise to implement effective security measures. To protect your data and systems from cyber-attacks, hacking and viruses, you need to invest in cybersecurity services or at the very least, appropriate level security software on any devices connected to the internet.

10. Economic uncertainty

Recent economic volatility and uncertainty has impacted heavily on SMEs, making it more difficult than usual to anticipate changes in consumer demand and supply chain disruptions. This highlights the need for you to prepare for economic uncertainty. Strong contingency planning will assist you to weather any downturns.

Excellent article by William Buck and Scott Harrington

Source - https://williambuck.com/news/business/general/understanding-the-top-10-challenges-for-smes-today/

I can add a bit more color:

1. Data management strategy including hybrid cloud, data and AI, cybersecurity, and the right business analytical tools - https://www.dhirubhai.net/posts/paul-young-055632b_cfos-must-keep-focus-on-streamlined-clean-activity-7158471687062126594-R1cj?utm_source=share&utm_medium=member_desktop
2. Addressing the challenges facing the regulatory, operational, and management reporting cycles through leveraging of data and AI. Linked in – https://www.dhirubhai.net/posts/paul-young-055632b_what-is-ebitda-and-why-is-edbita-important-activity-7182946656424747009-Vh7k?utm_source=share&utm_medium=member_desktop?
3. Updating your social and corporate governance model - https://www.dhirubhai.net/pulse/why-does-board-directors-senior-management-team-need-new-paul-young-5pt1c/?
4. Aligning ESG policies with data - Blog – Blueprint – ESG – Data – Singapore - https://www.dhirubhai.net/posts/paul-young-055632b_mas-gprnt-may-offer-esg-data-blueprint-activity-7166068309103214592-FJfs?utm_source=share&utm_medium=member_desktop
5. Embracing agile business planning and practices - https://testsigma.com/blog/agile-scrum-methodology-best-practices-agile-teams/

What can the government do?

1. Streamlining regulations as part of reducing red tape
2. Tax fairness including managing of payroll tax hike, capital gain changes, small business deduction,
3. Infrastructure spending as part of moving goods and people
4. Refining R&D tax credits including establishing incubation centers with all colleges and universities
5. Changing the capital write-off as part of addressing productivity challenges

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Paul Young CPA CGA

Paul is a former IBM Customer Success Manager that has deployed over 300 data and AI solutions across industry and geographies for the past 8 years. Paul is a Financial Planning, Analysis, and Reporting SME working with data including integration of macro and micro indicators as part of the integrated business planning and reporting cycle.

[email protected]

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Blog?—?How to select the best ESG solution for your /Organization?—? https://www.dhirubhai.net/pulse/how-select-right-environmental-social-governance-solution-paul-young-83mzc/

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Courses?—? https://www.dhirubhai.net/posts/paul-young-055632b_activity-7163302861974519809-ryf3?utm_source=share&utm_medium=member_desktop

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Blog – Stock Market – Canada – WE May 10 2024 - https://www.dhirubhai.net/pulse/stock-market-canada-we-may-10-2024-paul-young-czk9c/

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Stock – USA - https://www.dhirubhai.net/pulse/stock-market-we-may-10-2024-united-states-paul-young-gmrec/

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Blog – Australia Stock Market - https://www.dhirubhai.net/posts/paul-young-055632b_the-spasx-200-closed-274-points-higher-activity-7194661938516176896-t-t7?utm_source=share&utm_medium=member_desktop

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Innovation - https://medium.com/@paulyoung_81567/why-has-canada-failed-support-innovation-2d1178ef62f7

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