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Eight of the biggest challenges preventing small business growth

If your small business journey began well, but you’re concerned that your company isn’t growing as you hoped, don’t panic – you’re not the only entrepreneur to get stuck in a start-up rut.

Business growth can be affected by a number of factors, including some you can control – such as money management opens in new window – and others you can’t.

Your start-up may face the same growth issues as larger companies, including operating in a declining market or lacking access to suitable funding opens in new window.

But as a start-up owner, you have the advantage of potentially being able to pivot your business to experience growth.

So, what common challenges can new businesses face – and how can you overcome them?

 

Lack of strategic vision

Do you have an up-to-date strategy for your start-up?

A business strategy aims to create a long-term plan opens in new window you can follow to reach your goals.

Your strategy might define your ideal target audience, detail your competitive positioning opens in new window, state key performance indicators (KPIs), and give financial projections opens in new window.

Some entrepreneurs may not do enough work to validate their ideas opens in new window before they are developed – while others may not respond quickly enough to market changes opens in new window.

However, your business strategy can be adapted according to your clients’ needs.

As the demand for different products and services grows, adjusting your business strategy to encompass new opportunities can help your start-up grow.

Consider setting clear goals, conducting a SWOT analysis opens in new window (strengths, weaknesses, opportunities, threats), and creating a revised business strategy to ensure your company vision reflects your market.

 

Poor money management

Poor money management can reduce profitability opens in new window, hinder growth, and potentially threaten the survival of your start-up.

Consistently spending more than your business earns, being financially unprepared for potential issues opens in new window, and becoming too reliant on outside investments could all prevent your start-up from growing.

Addressing this issue and improving your money management could mean your business can afford to seize new opportunities and operate more efficiently.

Building an emergency fund, finding more effective ways to stick to a realistic budget opens in new window, and using financial management tools can help you improve your money management skills.

Find out how to give your start-up a financial health check. opens in new window

 

Founder dependency

How would your business run if you were sick and unable to work?

‘Founder dependency’ is when a small business relies too heavily on its founder – this can hinder growth if you are overwhelmed with work or unable to work as much as usual.

Founder dependency also covers activities such as winning new clients opens in new window, day-to-day operations, or essential skills or experience opens in new window only the founder has, creating a critical dependency.

It’s natural to want to be involved in every aspect of a business you’ve founded, but letting go of certain responsibilities opens in new window and looking at efficiency measures could help your start-up grow.

Consider delegating specific tasks to your team and upskilling staff opens in new window where appropriate.

Establishing more efficient processes and making better use of technology such as artificial intelligence (AI) opens in new window or business-focused tech packages could help your business run smoothly.

 

Lack of funding

While some areas of your business can be run on a small budget, others, such as research and development (R&D) and staffing, can require significant amounts of money.

If your start-up lacks funding, it could make business growth difficult, as you may not have the money to invest in areas which can promote expansion, such as customer acquisition opens in new window or paid marketing opens in new window.

Looking for alternative funding methods, such as crowdfunding, seed funding, opens in new window or small business grants opens in new window, could help ease the financial pressure and make further business growth possible.

Read our guide to best business funding alternatives opens in new window.

 

Staffing issues

Seeing your team expand can be exciting for a small business owner – it’s visible proof of success.

But if you’re hiring the wrong people opens in new window or unable to manage your employees well, it could lead to potential problems – a high staff turnover could cause instability and disrupt the flow of your operations.

To solve any staffing issues that could hinder your company’s growth, consider using a more thorough hiring process and investing in employee training so your staff have appropriate skills and feel valued.

Consider management training and what might motivate your employees opens in new window to encourage company loyalty.

Encouraging regular feedback could also mean you can deal with any issues swiftly.

Read our first-time employer’s guide to hiring staff opens in new window.

 

Cash flow issues

Cash flow issues can be a significant obstacle to the growth of your start-up.

If you don’t have adequate cash flow opens in new window, you may be limited in your ability to invest in crucial business areas such as marketing, staffing, and product development opens in new window.

If your profit margins are too small opens in new window, cash flow issues could mean your business does not have enough to invest in growth, such as increasing marketing spending.

Establishing a steady cash flow opens in new window for your business could be crucial for its success and future growth.

Consider creating more effective inventory management processes opens in new window, improving payment terms, and regularly monitoring your business expenses.

 

Fatigue and stress

Running a start-up can be exciting and full of new opportunities, but it can also be challenging for many entrepreneurs.

If you don’t take care of your physical and mental health opens in new window as you grow your business, you may find yourself making less progress, unable to make good decisions, or even suffering from burnout – which could prevent the growth of your start-up.

Take care of your physical health by eating a balanced diet, taking regular breaks, and getting enough sleep.

Also, consider taking practical steps to avoid stress opens in new window, such as staying organised, improving your work/life balance, and being open about your mental health with your personal support network.

Read our guide on how to care for your mental wellbeing and avoid burnout opens in new window.

 

Client dependency

Being dependent on one or very few clients to bring in a large portion of your income can be potentially risky for small businesses.

While loyal customers opens in new window are vital for growing your start-up, you could be taking on additional financial risk if your client base is not diverse enough.

For example, if one of your clients could not pay for your services, your business could lose a large chunk of income, which would negatively impact operations.

To avoid client dependency and to diversify your customer base, consider actively marketing your business to new customers and offering various products or services.

This way, you could work with several customers and sustain your business, enabling your start-up to grow even if your client base fluctuates.

 

Learn with Start Up Loans and help get your business off the ground

Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.

Our free  Learn with Start Up Loans courses opens in new window include:

Plus free courses on finance and accounting, project management, and leadership.

 

Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or its subsidiaries, or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

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