The biggest problems facing small businesses today

Small_business_challengesNumerous surveys highlight a wide range of problems which small businesses face on a daily basis both internally and externally.

External problems

External problems are countless, including the state of the economy, the high cost of insurance, taxes, red tape, health & safety, lack of bank lending, competition within the UK and from abroad, transport issues, employee skills gaps and shortages, and the list just goes on.

Internal problems

Internal problems are no less strenuous:

Cash
Finding it and managing the cashflow. It’s hard to get and there is never enough. If you are a fast growth company you can rapidly outgrow your available sources, if you are an underperforming company you can’t get it. The majority of companies don’t manage it well. Overdrafts, credit cards and leasing/hire purchase are the most commonly used forms of finance. Factoring and invoice discounting, loans from friends and family and new equity are the least common sources. Commercial loans, grants and overdraft had become substantially harder to obtain for a significant minority of businesses.

Most businesses experience some problems getting paid on time by their customers and with debt recovery. Good credit control helps to prevent this becoming a serious problem.

Six out of ten of small firms have a bad credit rating, according to credit reference agency Graydon UK. Having a good credit score is not only important to enable you to borrow funds, but will also affect your ability to secure good terms on trade credit. Follow our tips to improve your credit rating.

And don’t forget, as an IoD member you can receive free and independent advice on accountancy and finance issues by contacting the Directors’ Advisory Service.

Lack of a clear plan
Most businesses don’t know how to plan. Lack of a plan worsens the cash problem by wasting cash chasing tempting diversions, and throwing money at problems. Equally important is revising your plan according to changing economic and business conditions and to ensure your survival in the recession.

Ineffective leadership
This issue takes many forms. It is frequently in the form of depth of leadership. The founder of the company is too much hands-on and a) does not concentrate enough on his primary role as a leader rather than a manager; and b) fails to enlist support of competent managers and staff behind him or her either through recruitment or by outsourcing. This eventually causes the company to stop growing and eventually could lead to failure. Directors should always remember their core role and responsibilities.

The IoD runs an extensive range of courses, conferences, seminars, development programmes and services specifically designed by directors for directors to help directors improve their personal and professional effectiveness for the continued success of the business.

Sales/marketing effectiveness
This leads back to planning and leadership. Many businesses have not taken the time to decide what their USP is. They try to compete in conflicting areas, such as lowest price and highest service. One takes away money and the other adds cost. Part of the planning process for a new product should include a very clear answer to one simple question, “with all of the products and service available to my customers why should they buy from me?”

As an IoD member you can receive free and independent advice on a wide range of marketing issues by contacting the Directors’ Advisory Service.

Lack of execution
This may be the biggest of all:

Other common problems most often cited are:

  1. Finding and keeping clients / customers
  2. Preventing clients from eating away at your profits
  3. Time management
  4. Knowing how to price your services correctly
  5. Writing bids and proposals
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About Anna Burmajster

As Head of Information and Advisory Services, Anna and her team are responsible for helping members get the information and advice they need in order to run their businesses profitably and to the highest standard possible. Their enquires include; helping members to understand the implications of the latest employment legislation; battling with tax complexities; ascertaining member companies' competitors or advising on the steps to opening an office overseas.
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