What Are Some Of The Problems That Small And Medium-Scale Businesses Face?
Pasupati N Kundu
MCA registered Independent Director || Business Coach || ESG & Sustainability Consultant || I help ambitious business leaders take their business to next level in a sustainable way, adhering to GRI/ ESG/ BRSR principles.
The business world is full of SMBS now. You can find hundreds of small and medium-scale businesses popping their heads like mushrooms. Of course, it marks the economy's growth and contributes to a nation's GDP. However, along with the advantages, businesses face a lot of hurdles. They fail to get sufficient resources for a smooth flow of operations.
You will understand the real situation if you see the scenario more closely. Often, it seems easy to start a small-scale venture. However, the biggest challenge is maintaining the business profitably. A few tips can help make the business stand out in this crowded market.
Are you also thinking of going for such a small business? Learn about the possible risks and issues that you are going to face. This guide will help you analyze the problems and how to overcome the difficulties. Let us discuss the issues in more detail.
Top Challenges Of The SMEs
The primary reason behind the failures of most SMEs is not making the planned efforts. Furthermore, they do not know how to utilize the available resources optimally. As a result, businesses cannot show their full potential. The top challenges that the small-scale industry is facing today are;-
Analyzing the industry is important before you begin a new business. However, there is high competition in almost every sector. Small businesses need to think out of the box to survive in the long run. A great way to capture the market is going by the skimming technique. It involves charging the lowest price for a product among the competitors. This will influence more people to come forward and try the product. Besides, small steps like better customer service, proper promotion, and innovative features can make the brand more acceptable. As a start-up, the businesses can also arrange for quick deliveries.
Many times, small businesses need to suffer from higher overhead costs. One of the major factors is expensive shop rentals. Usually, an enterprise with around 5 to 10 employees requires a moderately-furnished office. However, the size may vary between 400 to 500 square feet. Apart from the rents, several other ancillary costs are also there. For example, some fixed expenses includes the Wifi, electricity, cleaning and washing, stationery, security, maintenance, etc. Some businesses suffer a huge losses due to these costs. If the turnover is not proportional, it becomes a burden.
To lessen this, the owners can take shared offices with all the necessary amenities. Shared office space is common these days and helps businesses to save considerable amounts. Furthermore, online selling is also a great way of enhancing sales. Digital space will need only the internet charges and no specific rentals. Hence, keeping track and enjoying fruitful business with a larger customer base will be easier.
The backbone of any business is the workforce. If the employees are not efficient, the operations will take a backlog. Therefore, businesses must hire the right personnel for the right job. Moreover, success will come only when the entity has a good staff retention record. Perks and salaries can be a big challenge for small businesses. However, employees will feel loyal if they get a favorable work environment and schedule flexibility. Always show that the organization is incomplete without their efforts. Instilling an ownership mindset among the employees is a great sign of prosperity.
A very crucial part of any business is adequate promotional and advertising activities. However, small and medium-scale businesses cannot afford to promote the product like big enterprises. Hence, they face great setbacks in approaching new buyers.
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Today, small businesses can opt for smart ways of promoting products. Instead of expensive billboards or large hoardings, they can utilize digital space for advertisement. Moreover, approaching customers through attractive reels or videos can ensure greater popularity within a short time. Word-of-mouth can also do wonders for these small entities. Please be patient and take these tiny steps for a better future.
The SMEs mostly follow traditional bookkeeping systems to record the day-to-day transactions. Managing salaries, payables, receivables, and other accounts regularly can be cumbersome. Furthermore, the entity may be understaffed too. Poor administration can adversely affect your business to a great deal. Moreover, businesses can even suffer a crisis of funds due to efficient handling of the cash flow. It needs professional efforts to handle accounting efficiently. The business will be at risk if the staff is not knowledgeable and competent enough. Therefore, for improved bookkeeping, the entities should hire skilled professionals.
However, a full-time accountant can be costly for the enterprise. To mitigate the crisis, it is better to go for outsourcing. Several budget-friendly firms offer such services. Small businesses can cut down the losses by connecting with these professional bodies. They can help in recording the daily affairs correctly for reasonable consideration.
It is a fact that quality goods come with a heavy price also. Therefore, it may become difficult for small enterprises to maintain the same quality at the same price after some time. Cost cutting will ultimately lead to compromising the overall services. However, that may affect the goodwill of the brand too. This is one of the crucial problems that most small businesses face, resulting in a complete shutdown. Scaling up is also important to cope with the higher demand. If you want your business to grow, some sacrifices are mandatory. Either you have to spend more funds, or you have to compromise on some other factors.
Businesses can handle these complicated situations by avoiding redundancy. Moreover, they can switch to better technology instead of repetitive jobs and manual labor. A little research and a proper market survey will make the owners aware of modern business practices. The ultimate aim will be to scale up without hampering the product quality. Hence, you can install more machines and hire experts to operate them. Go for innovation using cost-effective methods.
Often, the founders play multiple roles in small-scale businesses. This will create a huge pressure on the minds of a single person. As a result, the productivity of the business will go down. With business growth, the founders have to cope with the changed circumstances. They should know how to delegate responsibilities among the personnel. Appropriate delegation of the jobs also amounts to better management.
A business cannot stop its operations in the absence of the owner or founder. Therefore, there should be responsible staff to handle the business even when the founder is not physically present. However, the employees must be honest and skilled for fruitful operations.
Conclusion
The above points elaborate on the usual problems that most small and medium businesses face. The start-ups come into this category and often close down within a few months. The primary causes for such a downfall are mostly the ones we have discussed above. When you tend to open a new business, please calculate the costs and accordingly make smart moves. Calculative approaches often save small businesses from huge losses. Instead of lumpsum borrowings, start as a small shop with limited resources.
Please shift to a digital medium for better promotion. Follow the suggestions depicted above to improve your conditions. We hope you will do better by incorporating quick and pocket-friendly techniques in your business.