From small beginnings, mighty things grow: SMB challenges and how to overcome them

Countries around the world define small and medium-sized businesses according to different criteria. In the US, the Small Business Administration defines a small business as a company with fewer than 500 employees. In the EU, a small business is a company with fewer than 50 employees, while in Australia, having fewer than 15 employees categorizes a company as a small business. But regardless of whether they fall on the mid-sized or tiny end of the spectrum, SMBs are usually founded out of entrepreneurial vision and passion.

Accounting for over 90% of businesses, SMBs make a massive contribution to global economic growth and punch way above their waists. But it’s no secret that many small businesses struggle and fail within their first few years, which makes running one especially daunting. But being aware of these challenges is crucial in order to make your business a success. 

Let’s jump in and take a quick look at just some of the common challenges small and medium-sized businesses are likely to face and how, at a very high level, you can tackle them head on.

1.   Customer acquisition

Attracting clients is one of the toughest challenges faced by small businesses, often because they lack the brand recognition that enables larger companies to gain the market share. They may not possess the resources and experience that would enable them to generate clients quickly. SMBs can lack manpower and connections to be well-positioned for success.

Looking to gain customers as an SMB? Be sure to attend relevant networking events and leverage the power of social media to attract buzz and attention. Establish your company’s voice and determine the unique role you play in the market. Lots of companies out there may already be doing the same thing, so it’s crucial for you to do it differently or better. Hone in on your target customers by taking the time to create well-developed buyer personas. Once you understand your customers, nurture your relationships with them so they stick with you and spread the word about how great you are.

2.   Talent acquisition

More than half of small businesses say they have a hard time attracting quality employees. Onboarding talented staff is expensive and retaining existing workers in the age of The Great Resignation is a major challenge. Time and money spent on talent acquisition can cause serious strain for a small business.

To optimize your hiring process, make use of assessment tools that help determine whether candidates are a good match for your company’s brand and culture. Hiring the right talent in the first place helps small businesses develop a solid core team and avoid excessive turnover. As a small business, you may not be able to compete with the salaries offered by big corporations. Be creative and tailor your compensation package to offer perks like flexibility, performance incentives and profit-sharing.

3.   Digitalization

Businesses have increasingly taken to digital channels to interact with customers, a shift that became even more pronounced during the COVID pandemic. SMBs tend to be slower adopters of the shift to digital and e-commerce. The high cost of digitalization and difficulty in scaling down digital solutions for smaller companies are often the culprits of this digital gap.

To meet the rising need to digitize, small businesses should look into workplace training initiatives and government-based, targeted financial support. While the initial implementation of digital innovation requires time and effort, the long-term benefits tend to pay for themselves. AI and cloud-based approaches are often much cheaper than their clunky predecessors. An efficient, well-developed digital infrastructure is a key component of small business success.

4.   Lack of capital

Financial resources allow a business to thrive more efficiently and develop a quality product. In a classic business Catch-22, small businesses need money in order to make money, and getting the ball rolling isn’t easy. Many small businesses reported that lack of funding and cash flow was their primary business challenge.

Financial planning plays a major role in maintaining funds while a small business is trying to get off the ground. SMBs should educate themselves on the basics of cash flow management and plan for unexpected scenarios. Many companies that suffered or failed during the pandemic had an underlying financial fragility that contributed to their downfall.

Small business loans, or solutions like Capital Advance, can provide affordable, accessible financing to businesses getting off the ground. Loans can be used for equipment purchases, business expansion, paying employee salaries, marketing and advertising needs, and more. Not all loan providers work with small businesses and startups, and loan terms vary widely, so be sure to read the fine print.

5.   Cross-border payments

While many small and medium-sized businesses seek to do business in international markets, they often lack the capacity and resources to manage international transactions, leading to wasted time and money. The complexity of handling cross-border payments often stunts SMB growth. Dealing with international currencies and navigating foreign banking regulations can deter SMBs from successful global expansion. Other challenges may include cultural barriers in dealing with foreign clients and suppliers, and logistics and supply chain issues. What’s more, small business owners may not fully understand or be prepared for the costs associated with international payments. Banks often charge a premium for international transfers and exchanges, and the costs aren’t always transparent, leading to some nasty surprises for SMBs.

Savvy small businesses can alleviate potential friction in cross-border payments by using a payment platform to manage international payments and currency exchanges. Payoneer lets you easily send and receive payments in over 150 currencies around the world with minimal operational costs and transaction fees. You’ll be able to withdraw earnings in your local currency at a competitive, low rate, and access working capital to invest back into your business. With Payoneer, small and medium-sized businesses can expand their global presence without the headache of payment management and compliance woes.

Resilient small businesses know how to make use of the right platform for their challenges. Thousands of companies already trust Payoneer to handle their business needs including cross-border payments. Discover Payoneer to learn how our solutions can revolutionize your business.