Posted by Shivali Anand
July 28, 2021 | 5-minute read (987 words)
Every day, entrepreneurs experience obstacles, some of which are more difficult to overcome than others and can even cause a firm to collapse. Data from the United States Bureau of Labor Statistics indicates that around 20% of small firms fail in their first year, 50% of small businesses fail in their fifth year and 80% of small businesses collapse in their 10th year.
It is critical to understand what may cause a business to fail and how each hurdle can be controlled or avoided entirely to safeguard your firm. Here are seven common difficulties faced by small businesses and some tactical suggestions on how to prevent them.
Taking on excessive debt: According to Guidant Financial's 2020 Small Business Trends study, the most common problem faced by business owners across sectors is a lack of money or insufficient cash flow. While taking on debt to establish a business or fund specific operations may be required in some circumstances, entrepreneurs who do not prioritize debt repayment by making regular payments may find it challenging to develop their enterprises.
Possible solution: Alternative funding sources, such as crowdfunding, portfolio loans and even 401(k) business finance can be used by business owners to avoid being burdened by debt. The latter permits individuals to establish a business using their existing retirement assets without suffering tax penalties or taking a taxable payout.
Not identifying potential customers: Even the largest and most successful organizations, such as Apple and Toyota, encounter this problem regularly. Finding consumers, on the other hand, maybe a particularly tough challenge for small firms.
Possible solution: To identify consumers, company owners must first determine who their ideal clients are. They can begin by creating buyer personas, which may contain information such as the appearance of potential consumers, where they work, what they do, where they spend time online and so on. This allows them to begin generating content and reaching out to their target consumers with messages that matter to them.
Recruiting and retaining skilled employees: This is another significant problem, particularly for small firms. Hiring workers is a time-consuming and costly procedure; according to data, the average cost-per-hire is $4,129, with a 42-day average wait to fill a post. Employee turnover may be expensive in the event of a poor hire.
Possible solution: It's not as simple as publishing a job description and interviewing candidates to hire a new employee. It's critical to go through all stages of the recruiting life cycle to guarantee that hired applicants are qualified to make long-term contributions to a company. Business owners that use an end-to-end strategy are more likely to place the appropriate individuals in the right roles.
The capacity to keep workers should be a vital measure of a company's health. As a result, HR managers and department heads must do all possible to manage their employees in a manner that lets them to keep their most exemplary employees.
Leadership that is ineffective: If the individuals running the company have weak management abilities, the company may fail. Workers, clients and vendors look to the leaders as a representation of the company as a whole.
Possible solution: Company owners must learn a few small firm leadership skills to lead their teams and keep them functioning effectively.
To effectively lead their teams and keep the business running, business owners must master a few small business leadership skills. For example, they can establish a clear, consistent vision for their team members from the beginning, communicate often and effectively, offer and receive feedback, and understand how to put the idea into action.
Failure to communicate with customers: Customers are crucial to every company's success. And a company will collapse if the proprietor does not communicate with their consumers or does not grasp what they require. Customers may, for example, appreciate the product or service on offer yet wish for an upgrade or extra features.
Possible solution: Entrepreneurs must maintain a close watch on what their current and future consumers want. They may use customer relationship management systems to poll their consumers, perform market research to learn about their interests and keep on top of trends.
According to studies, 91% of searches do not go past the first page of results, and more than half do not look past the first three items on the first page.
No online presence: A well-optimized website serves as an advertisement. Therefore, it's an essential "place" for enterprises. Customers often give up and go to a rival when they can't discover a company online (read: one with a website).
Possible solution: Apart from having a website, company owners may boost their online presence by including features like a basic homepage, landing pages, call-to-action buttons, testimonials and other tools to turn visitors into buyers. They should also include conversion rate optimization and A/B testing in every piece of their site to correct anything that isn't functioning.
Search engine optimization is also a vital aspect of a website. Ensure yours is a mobile-friendly and secure (SSL) website; create high-quality content; prioritize user experience; use data analytics such as Google Analytics and keyword research; and include quality backlinks, among other features, to rank highly in the search results.
Holding too many positions: Many entrepreneurs attempt to handle every element of their firm on their own. Did you realize, however, that multitasking can reduce productivity? According to the American Psychological Association research, even momentary brain blockages caused by frequent switching between activities can lose a person more than 40% of their productive time.
Possible solution: Even if every entrepreneur's firm is a source of pride and delight, there are elements of it that they must let go of to succeed. If they can't afford to hire a full-time workforce, they can outsource specific duties. For example, hiring a specialist accounting outsourcing business to handle all of their financial and accounting needs helps them focus on expanding their bottom line rather than administrative duties.