Common problems you may face when running a businessDue to their smaller scale, teams and tighter budgets, the problems SMEs face can be more acute and threatening to their health. In a survey from last year, 79% of UK SMEs said their biggest problem was attracting new customers. While larger businesses experience this too, SMEs can struggle to attract customer interest as they don?t have the demonstrated brand success their larger counterparts have. Attracting new customers isn?t the only problem SMEs experience. A major problem SME owners face today is dealing with their changing roles.
Changing rolesLeadership roles in a smaller business are no longer defined by one or two aspects, such as strategic skills or even team management. In any one day, SME owners can expect to be the company accountant, marketer, sales and operations director. The list of new responsibilities is expansive, encompassing roles they might not have done before. A big driver of this change is the advent of new technology, meaning even business owners have to upskill themselves and learn these new processes. Let?s delve deeper into the problems SME owners face when running their businesses, starting with social media and digital marketing issues.
1. Social media and digital marketingTargeting customers via social media is a cost-effective way to market and advertise a brand. Studies show that a vast majority of UK SMEs (64%) are already selling online. However, only 60% of UK businesses are harnessing social media effectively and using it as a marketing tool ? meaning that SMEs, (counting for over 99% of all UK businesses), are missing out on key commercial opportunities. Looking at different regions in the UK, London based businesses are the most likely to have a social media presence, (47%) followed by Yorkshire/Humberside (40%). However, the West Midlands has only 21% of businesses engaging in social media to promote their goods and services.
Bad websites and marketing strategiesWhile many SMEs have a business website, many are not responsive enough to deal with customers ? with 40% of SMEs failing to optimise their sites for a mobile audience. Overall, social media and digital marketing can be a challenge for SMEs without the knowledge or willpower to take advantage of these beneficial systems. This is reflected in the 27% of SMEs (2018), that felt their marketing strategies lacked effectiveness.
How to deal with bad websites and marketing strategiesBy failing to engage in digital marketing, and specifically, in creating a content-based strategy for websites, SMEs are missing out on crucial ways to turn customer leads into sales. Effective digital marketing takes time and requires a comprehensive content strategy including keyword optimisation, which gives SMEs the digital presence and the search engine rankings they need to engage with customers and hold out against competitors.
2. Delayed paymentsGetting paid on time continues to be a major issue for SMEs. Cash flow problems have become so serious that they?re killing off as many as 50,000 small businesses per year ? costing the UK economy ?2.5bn annually. According to research from the last quarter of 2019, there was ?14bn of payments still outstanding for these businesses. The problems of late payment for SMEs come from two main sources; customers and suppliers.
How to deal with late paymentsCustomers increasingly like to buy goods and services online, or if they come in-store, they use contactless forms of payment. By having the facilities to accept payments online, in-store or even over the phone, SMEs can cut down on the chances of incomplete or late payments from customers. However, late B2B payments remain the biggest cash flow threat for SME businesses. Statistics from late 2019 suggest that businesses pay their smallest suppliers up to 30 days later than their bigger suppliers. Sending an invoice by email rather than in the post could speed up the payments process. Alternatively, invoice finance is a good way to maintain steady cash flow by unlocking the capital from an unpaid invoice before it?s paid.
3. Staff leaving – one of the biggest problems you’ll face as a business67% of SMEs have difficulties retaining their staff and experience high levels of employee turnover as well as problems recruiting. Losing staff is even more disruptive to smaller businesses because of issues such as workload management, as well as the costs of advertising for a post. There is also the issue of time lost ? where managers and owners have to take hours out of their working week to write up new job specifications, vet applications and bring in candidates to interview stage. If a new hire doesn?t work out, it can cost an SME an average of ?125,347 in wasted advertising, recruitment and training costs. There?s also the issue of ensuring talent remains in an SME, where small-to-medium businesses are losing up to 14% of their staff each year. What?s at the crux of problems related to staff retention in SMEs? For a start, many departing employees are looking for better career progression elsewhere, (21%) while a significant number are looking for a pay rise (19%).
How to deal with staff leavingWith money a big motivator for staff looking elsewhere, SMEs owners should try to establish regular salary reviews with their employees to keep up motivation. Budget permitting, SME owners could also consider offering salaries for roles that are above the market average. This should encourage ambitious candidates to apply for roles while making it more likely that skilled staff remain in a business. Creating a series of ?work perks? are also an effective way to recruit and retain talented staff. For example, offering flexible hours and remote working options are desirable factors for candidates today, and they?re free to implement. For businesses with more to spend on workplace ?extras?, subsidised gym memberships, free team lunches, and activity days outside the office are effective ways to keep staff happy while building a sense of team unity. SME owners and managers should also keep their finger on the pulse of workplace culture, and in particular, to see if anyone is suffering from workplace stress, as this can be a key cause of staff turnover. Signs such as staff working late, being unable to handle their workload, or prolonged or regular absences are key indicators of workplace stress. Checking in with employees regularly, including holding informal catch-ups are a good place to start. It could also be a good way to assess what wellbeing policies might need implementing to stop this from happening in the future.
How to know when to make a hireBefore you make the time and money investment of advertising for a job role and interviewing candidates, think carefully about why you need to make a hire in the first place. If you can answer the below points, you probably need to make a new hire:
- Why do you need to make a new hire?
- What can this new hire do that your existing team can?t?
- What activities do you need them to do?
- Do you have a clear idea of what they?ll be doing?
- Is there anyone in your existing team with the potential to fill this role?
4. Technology failures and changesInnovation and digital transformation are buzzwords in business life today, however, a high number of SMEs are failing to invest in the appropriate technologies to drive their businesses forward. While 79% of SMEs consider innovation important, one in ten smaller businesses failed to buy any new technology over the past year. Budget concerns seem to be the biggest factor ? with a quarter of smaller businesses spending less than 10% of their budget on new technologies. Some of these SMEs voiced a desire to adopt new technologies, providing there was more government support, including bursaries on offer, according to a survey from CitySprint.
How to deal with technology failuresA study conducted by the Department for Business, Energy & Industrial Strategy on ?attitudes to adoption? suggests that an SME?s willingness to adopt new technologies is dependent on the organisation?s culture and in particular the attitude of its key decision-makers. For example, if senior leaders are averse to using new technology to innovate processes, the business at large will have a closed attitude to innovation adoption. On the other hand, if a business has a good understanding of what terms such as disruption and innovation mean, they?re more likely to seek out new processes to achieve this rather than maintaining the status quo. This means business owners should implement a new and ‘open’ approach to technology adoption from the top in order to change the culture of their business towards technology use.
SME owners weigh in on common business problems1. Laura Jackson, co-founder, Popcorn Shed On cash flow You?re squeezed by retailers asking for low prices and extended payment terms, as you?re a new business with no track record your suppliers often won?t give you credit terms… so cash flow can be a real challenge. Fortunately our accountancy software Xero helped us to build cash flow forecasts and allowed us to access all of our financial information quickly and easily, which meant we always know where we are with our cash flow and turnover. On engagement They say competition is healthy. However, in the early days, we thought it was a great idea to post big sales wins on our social channels to let our customers know where they could now buy us from. However, our competitors were watching closely, and those accounts became their hot targets! With larger budgets and more money to spend, this became a big issue. We quickly wised up and stopped sharing accounts that we hadn?t established a great relationship with first. 2. James Dunworth, Chairman E-Cigarette Direct On hiring and retaining staff Staff can make or break your business. We once saw a difference in turnover of 30% when a weak staff member left a shop and was replaced by a stronger one. As your business grows, you?ll inevitably face issues which can range from theft to incompetence. You can never eliminate all problems, but putting thought and effort into your recruitment process is essential. We spent many hours identifying the culture we wanted and the values that were inherent in the company and then tweaking our interviews so we were identifying the right people for the company – all of which has helped us recruit great people who have helped us drive our business forward. On operations In the early days of a business, you can grow so fast that before you know it you are running around putting out fires and managing your business with no time to think about strategy. At times like this, it?s hard but important to think about how to improve operational efficiency. Putting in place processes that everyone understands – with the help of tools like Trello and concepts like the AGILE framework – can help here. You also need to think about putting in a management structure as soon as you can so that your time is not taking up with smaller and less important tasks. At the same time, it?s important not to generate too much bureaucracy. We aim for what we call minimum viable bureaucracy – the least amount of bureaucracy needed to avoid chaos. On innovation Data is not your first thought when you start a business. But as your business grows, it?s essential to get a hold of data. Without data, whether its account, web rankings, profit, margin, hours worked, you are driving blind. This can be challenging – the same skills you need to start a business are not always the same skills you need to have a grasp of data. We solved this by bringing in people who had a strong grasp of data, including our current Managing Director and a dedicated data analyst. 3. Richard Gwatkin, CEO and founder, Ch!tzo On cash flow The old saying ?cash flow is king? is not wrong. Many entrepreneurs and SME business owners have some great, expansive plans and exciting dreams, but managing your cash flow can make or break the business. Many plan for how they believe the business should be, but lots of business owners learn the hard way that realistic planning with a lot of contingency is essential. On innovation In my experience, another issue faced by SME owners is that there aren?t many businesses out there that are selling something truly unique, and it?s hard to differentiate your business from your competitors. There have been some really innovative stuff coming out of the SME landscape that shows people?s creativity and brilliance. At Ch!tzo we are constantly thinking about how we can differentiate ourselves from a product, business model and brand perspective. On hiring and retaining staff People are usually the biggest cost to any business and this is a critical part of any SME?s success. In order to grow in line with forecasts, many businesses need to take on more people, which should of course already be built into any forecasts from a cash flow perspective. Once the business is ready to take that step, finding the right people is a real battle. Even when you think you?ve found the right person, this is not always the case and it?s a costly lesson to have to learn. 4. Lauren Williams, founder, London Grace On staff retention Staff turnover is a problem many small and medium businesses face, but particularly within the retail and hospitality sectors. Early on, we were surprised to find that many of our team members did not expect there to be progression opportunities at London Grace and that when they did arise, our team members didn’t seem to have the self-belief or confidence to put themselves forward for promotions. We wanted the team to understand that our focus was to grow and develop them alongside the business so that everyone benefited from the success of the brand. We invested in management training programmes, performance-driven incentives and work experience opportunities and found that motivation and staff retention improved as a result. Today we’re proud to say that almost 70% of our office team and management roles were promoted from within (many of whom joined us in entry-level roles). Not only does this save us money on recruitment costs, but we also believe it creates managers who know the business from the ground up and who are much more appreciative and loyal to the company. On budgets and marketing We’ve expanded quite quickly, opening 10 stores in 5 years and there are obviously huge costs involved in the fit-out and set up of each location. Unfortunately, this left us with very little budget for marketing, particularly when opening our first few stores, so we had to look at ways to maximise the least expensive channels at our disposal. Social media has enabled us to spread the word about London Grace at a very minimal cost, thanks to the relationships we’ve developed with influencers. We collaborated with influencers whose followers we believed closely aligned to our clients and target audience, paying more attention to their aesthetic and the demographics of their followers, rather than the number of followers they had. These collaborations often result in a significant increase in our website traffic and subsequent bookings and are a quick and effective way of increasing brand awareness each time we open a new store (as we reach out to local influencers in the area). The nature of our services means that we have periods of the year where our stores are much busier (like summer and Christmas) and periods which are quieter. As with many retail and beauty brands, the beginning of the year is a very quiet time of year for us, as people generally don’t want to spend money on treating themselves and the cold weather keeps people indoors. We considered discounting, but as many brands offer savings during the sales season it would be difficult to stand out. To capture the attention of our clients, we decided to instead give our clients a physical voucher to spend in-store in January, in return all they had to do was fill out a short questionnaire about their experience at London Grace. The first year we launched the promotion we were shocked by the number of clients who took part and the effect this had on the footfall and takings in our stores was even better than we could have imagined. Not only does the promotion provide a much-needed boost during a quiet time of year for the company, but the data we?ve collected as a result of the questionnaires has also proved invaluable to our business strategy, from informing us on where to open new store locations, to highlight ways we can improve the service we provide.
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