Challenges Facing Small and Medium Sized Businesses
Having worked with over 400 businesses over the last 18 years, I believe I’ve gained a good perspective on the key challenges facing small and medium sized businesses (SMEs) today.
Some are perennial and others are particularly relevant to UK-based businesses because of the recent political turbulence. This has created specific challenges that have severely disrupted some businesses and will continue to do so for some time.
The top challenges facing small and medium sized businesses are:
- Building an “A” team
- Strategy Execution
- Making the business stand out
- Putting your employees first
- Systems and Processes
- Measuring performance
We will now take each of these in turn to explore them in more detail.
There is no academic qualification to be a leader of an SME and I suspect if one were offered most entrepreneurs eager to get started wouldn’t do it any way. Nevertheless, given the many challenges of running a business and leading people, a lot of owners falter because they don’t have the right skills.
Some people believe you have to be born a leader. From my experience this is a fallacy. There are now plenty of great books on leadership to show that right skills can be learnt. You don’t have to be like Richard Branson to be a great leader in your business; just be equipped with the right skills and habits to make a difference for your team.
I have noticed over the last few years that getting the right culture is becoming more important to business owners. You need to clarify the purpose of the business and from this purpose the values of the organisation can flow. Four or five values seem to be the maximum everybody can remember.
See them exhibited by colleagues and behaviours can be measured against them. This then leads to a defined culture that the members try to protect and develop. There is a phrase, “Culture beats strategy every time” and I think in our complex and ambiguous world this is probably the case.
A consequence of a lack of leadership development is a lack of business planning in most SMEs. There are now well documented, single page, business planning tools available that can really help your business focus on what matters.
It doesn’t take long to capture the ideas and it’s time well spent thinking about what the business needs to achieve its goals in three years’ time and how those ideas can be realised. It’s also great for team development if the key players in the business are involved in the “how”.
4. Strategy Execution
Something that really helps businesses to succeed is to be great at executing strategy, plans and ideas; being able to take a three-year plan and break it down into 12 months objectives, and then be really focused and translate those into 90-day objectives.
By meeting their objectives every three months, business owners can start to benefit from the marginal gains that are achieved by meeting each objective.
5. Building an “A” Team
The next challenge to trip up a lot of SMEs is finding the right people to grow the business, the team members who make sure all functional aspects are delivered such as sales, marketing, production, operations and accounts.
To run and grow a business effectively, an owner or managing director should be removed from the distractions of running the day-to-day operations. Having a great “A” team in place really helps this. Initially, this may be one person who is a star player but eventually, as the business grows, each function needs somebody who has complete ownership.
6. Making the Business Stand-Out
Finding a competitive edge in the crowded market places of today can be a real challenge. It’s important to every business but requires time, money and resources to make sure the company has done everything it can to stand out.
7. Putting Your Employees First
Richard Branson is often quoted as saying:
“If you look after your staff, they’ll look after your customers. It’s that simple.”
If you put your staff first, make sure they are trained, understand what needs to be achieved and have the autonomy to get on with their jobs, they will deliver the results needed to keep your customers happy.
8. Systems and Processes
A lot of smaller businesses seem to think having systems and processes makes them less competitive. The reverse is actually the case. Good, well considered, tried and tested systems and processes means what is delivered to the customer, whether a product or service, is what they expect and is delivered right first time, every time.
Productivity is very much aligned to good quality systems and processes. However, it is more than that. It’s about whole company awareness. Lean thinking needs to be embedded throughout the business so that everybody acts smarter at whatever level they are employed.
When a problem is identified, the team go to the problem rather than sit in meetings theorising about it. Sometimes just talking to the problem owner directly can provide a quick and easy solution. It massively reduces complications arising out of miscommunication.
10. Measuring Performance
As Peter Drucker is often quoted: “What gets measured, gets done”. This is an enduring truism. One of the challenges facing small and medium sized businesses is the ability to identify the key metrics by which they should drive their businesses.
Most will measure sales revenue and gross/net profit on a monthly basis but often that’s far as they go. Finding the right measures can be a real challenge and one that takes trial and error to discover what really works for your business. These are the metrics that drive the right activity and are often sanity metrics.
11. (Bonus item) Political Changes
One of the main challenges facing small and medium sized businesses face due to political pressures are the costs associated with the living wage and auto-enrolment.
In addition, Brexit and the subsequent rapid fall in the value of sterling have caused a number of serious challenges for businesses who import and resell to others. For some, the drop in gross profit (the difference between what has been bought and sold but ignoring overheads) has put into their whole viability into question because of the tight margins they operate on.
For a lot of companies it’s very difficult to increase prices which puts a constant pressure on controlling costs. The challenges facing small and medium sized businesses owners is they have no control over politically driven cost increases such the living wage and pension contributions and are unable to pass them on to the customer.
Consequences of Not Getting the Above Right
A number of issues such as cash flow, succession planning, staff turnover and eroding margins often come down to the business owner or managing director spending too much time IN the business rather than working ON it.
So a lot of challenges facing small and medium sized businesses are consequences of not finding the time. These include:
- Growing revenues
- Cash flow
- Overly dependent on a few clients
- Staff turnover
- Always competing on price
- Diminishing profitability and returns
- Raising capital (poor business plans and underperforming management teams struggle to raise finance)
As the leader of the business, the business owner or managing director has to stay energised. Their vigour is infectious and permeates throughout the business. Maintaining your energy levels can be a real challenge as business becomes more competitive and technology-based with more pressures than ever before, Regular exercise, a good diet and time to rest are key.
Getting The Right Support
If you would like help in addresses these challenges, go to Business Coach for more information.
Digital Marketing Support
Moving away from the strategic issues. One of the tactical challenges facing small and medium sized businesses is keeping up to date with what works and doesn’t in digital marketing can be really hard and that’s important as you can waste a lot of money on things that used to work but now don’t.
Given that most of the businesses we work with need growth and generally that means more sales, we have chosen to change our emphasis on becoming a hybrid digital agency. What is a hybrid digital agency you ask? Well, we will not only do your digital marketing for you, we can also help you manage it or it maybe its just that you just require developing some specialist skills like generating leads through LinkedIn.
Take a look at the range of services we can help you with so that you can get digital marketing working for your business: Digital Marketing
Looking for more support on how you can help small and medium sized businesses?
We offer 1 hour Online Video Consultations to help you overcome your business challenges for just £80 +VAT with expert Peter Dickinson. Contact us today to book in for your session or alternatively on [email protected]/0333 050 9053.