The 7+1 Biggest Challenges Small Businesses Face (pt.2)
Small is beautiful. Or so argued the British economist E. F. Schumacher on his seminar eponymous book. In it, he blasted conventional notions that, when it comes to business, “bigger is better”.
Being small can be better for efficiency, agility, for the environment and even for society in general he argued.
Now you may or may not agree, but there’s no denying that SMEs (small to medium enterprises) and self-employed freelancers form the backbone of the economy. There’s also no denying that it’s a challenging time for them, as they have to face recovering markets from one side and corporate behemoths on the other.
In our previous post of this two-part series, we examined 4 of the most common business challenges that SMEs and one-man (or one-woman) shops face. In this one, we’ll examine what we think are the remaining major issues — and give some tips on how to overcome them.
5. Money management and Logistics
A lot of smart business owners (and especially freelancers) get into it because they are passionate about their job. And there’s nothing wrong with that. But what they soon discover is that there are lots of other things that they need to tend to — dealing with bureaucracy, keeping accounting books, chasing customers to pay, and, managing their revenues.
Fortunately, modern invoice management platforms, such as Elorus, make it easy to keep a track of your clients and projects, check who owes what, get deep insight about your cash flows, etc — even invite your accountant, so they directly get all the information they need to do your taxes and keep your books.
But not everything can be automated — you still need to stay on top of things, deal with the inevitable bureaucracy (state permits, etc.), nag your clients to pay, budget and buy office supplies and anything else needed for your business, and make sure that you don’t go over budget. It can be a handful, especially since you probably do most, or all, of the actual work too.
The trick is not to see those things as a necessary evil, but as an essential part of your job — and to be as organized and typical about them as you would be when working on a project. Consider it your continuous “running a business” project.
Of course, as soon as your finances allow it, do try to hire a few people to help you with those things. If you’re a single-person company, hire an assistant — and make it someone you trust. If you are a small business, hire a few people in secretarial, sales and similar roles — not just in roles directly involved with project work.
While small is beautiful, small comes in many sizes, and some are bigger than others. If you’re a single-person company, you might aspire to grow into a 5 person team. If you are a SME with a couple of dozen of people, you could opt to start another office in another city or reach 100 employees.
For that to happen though, you need to attract customers and projects. And this means that you need to either work in a field with limited competition and plenty of customers (e.g. the sole electrician in a small city), or you have to make to potential clients an “offer they can’t refuse”.
No, we’re not talking Godfather style. Just try to have a unique selling point, something competitors can’t do — or can’t do as well, or as cheaply. You might need to invest in some tools to make this happen (but remember to gauge for market interest first, e.g. by checking how such ventures do in similar places).
For example, if you have a photography printing business, you can get more clients if you invest in and offer some unique kind of printer, e.g. for larger prints, or for more accurate colors, etc.
If you have already been in business for some time, try to examine what brought your existing customers to you, and what they like about your business. You don’t even have to analyze them to get that insight — it might be enough to just ask them directly. When you do know what brought them in (and kept them coming), try to build upon on this knowledge to attract potential customers with similar needs.
If you’ve hit a plateau (with customers growth stalling), on the other hand, it might be time to try something new. Which brings us to our next point:
7. Staying relevant
Just because you already have your own a business and are knee-deep in projects, doesn’t mean you shouldn’t follow what goes on in the general industry. In fact, you very much need to do so, else you risk losing your relevance.
First and foremost, track what your competitors are doing — and see how you can keep up with them, and even do one better.
This includes reading the relevant trade news outlets. You also need to be quick to recognize new trends and take advantage of them, before your competitors do. In fact, depending on your kind of business you’ll also need to gauge the general health of your industry or specialty.
Perhaps your business was based on a fad (like all those cute little cupcake shops that opened around the mid-nineties and have been steadily closing since 2012 or so). Or it might have been a viable industry with a long tradition once, but which is now on the wane because of some new technology (bookstores, video rentals, and record stores fall into this category).
In this case, you might even need to reinvent your whole business — or as the startup guys call it, “pivot”. Don’t be afraid of that either, and don’t get too sentimental over a declining industry — as Bob Dylan once sang, “He who is not busy being born, is busy dying”.
7+1 Competing with the big guys
A common problem with SME and single-person businesses that operate on some market niche is that when that niche grows, and a big player decides to tackle that niche, they can easily conquer the market.
Consider all those small software companies creating RSS Reading software when Google came along with Google Reader. Or all those early video sharing websites, when YouTube hit the web. This is not just a web thing either — the same thing can happen in any area. E.g. your local fast food joint might be eclipsed by a McDonald’s opening in your city.
A big company has more people working for them, more resources, more money, more visibility, and more influence. To compete against such a threat you need to specialize — to offer things, custom designs, exotic materials, luxury products, etc., that a big company, aiming for the mass market (the “average Joe”) can’t or doesn’t care enough to deliver.
In this two-part series of posts we had a look at the most common small business problems — and suggested a few ways to overcome them. Stay tuned for more posts with advice, tips, and tricks for freelancers and small businesses!