When it comes to running, managing, or working as part of a small business, there are many challenges. Small business owners are true multitaskers who wear many different hats. One day your main focus might be dealing with an HR issue and the next day you’re filling out forms for a small business grant. It requires you to be an expert not only in your field but in so many other areas.
We’ve outlined the top 16 small business challenges and grouped them into five main buckets:
- Hiring and management
- Setting and managing your budget
- Marketing challenges
- Getting, serving, and retaining customers
- Balancing it all
Let’s talk about the major small business challenges in each of these buckets plus how to address them for success (and to save your sanity!).
Small business challenges: Hiring and management
Small business owners are usually solely responsible for hiring, managing, training, and retaining employees. We’re covering the top hiring and management challenges small businesses face here.
1. Hiring the right talent
Right now, half of small business owners say it’s harder to find employees to hire than it was a year ago. With a growing worker shortage, navigating uncertainty around COVID-19 procedures and policies, and looking for the right fit for your business and your team, hiring is a huge challenge for small businesses.
How to address it: There are a few different ways small businesses can overcome this challenge. One is by relying on employee referrals—and even offering an incentive. Ask your best employees to refer one or two of their connections and offer them a bonus, gift card, or paid day off if you end up hiring their candidate.
If you find you’re still having trouble hiring the right talent, you may consider attending a local job fair, hosting a hiring event, or running online ads for your open positions.
2. Managing employees
Once you have the right employees, managing them isn’t really much easier. You have to learn how each of your employees works and prefers to be managed, deal with scheduling and time off, and handle HR issues as they arise.
How to address it: There are many ways to be a good leader. It all comes down to what works for you and your employees. But clearly defining roles and responsibilities, putting procedures in place for things like breaks, scheduling, and time-off requests, and having regular one-on-one meetings with your employees can help you retain employees and mitigate any management issues.
3. Training employees
Training is another common small business challenge. One survey found that while over 90% of small business owners saw the value in training and investing in employees, less than half actually did so. With limited time for training and fewer formal policies in place, it can often feel like you’re flying by the seat of your pants when it comes to onboarding a new employee and ensuring each employee is performing up to standard.
How to address it: The best way to overcome this challenge is to create a formal training process. This may include documentation of processes and policies, a training schedule before a person fully starts working their shifts, and potentially finding a training software program that can help streamline your training program.
Small business challenges: Setting and managing your budget
This is a huge challenge for small businesses. How do you know how much to spend on every aspect of your business from rent to marketing to salaries and more? It’s a lot to juggle. Here are some common budgeting challenges small businesses face.
4. Determining the right budget
Creating your annual budget is a giant undertaking. If your revenue fluctuates throughout the year or depending on various factors (like a potential pandemic…), it can be even more of a challenge. You don’t want to under-budget or you might not be able to grow, but you don’t want to overspend, either.
How to address it: Your small business budget should include all costs associated with your business, including fixed costs, variable costs, and semi-variable costs. You can calculate these by looking at your financial records and taking note of any trends.
You can also use this data to help you identify any areas you can cut back on your budget and any areas you need to focus more budget. For example, if you noticed that in 2020 you didn’t have many visitors to your location after 7 p.m. during the week but you’re open until 9 p.m., you can adjust your store hours, which can save you money.
5. Calculating ROI
Another challenge many small business owners face is calculating and measuring ROI. There are different types of ROI for your business, but one of the main challenges is determining marketing ROI. Marketing ROI refers to how much revenue your small business generated from your marketing spend.
How to address it: You can calculate marketing ROI by using this formula—(Sales Growth – Marketing Cost) / Marketing Cost = Marketing ROI
Taxes are a huge challenge for small business owners with one survey finding they cause both a financial and administrative burden. Filing taxes for your small business takes time, expertise around various laws and guidelines, and organization. When you add this on top of the other challenges small businesses face, it can be overwhelming.
How to address it: One way you can make taxes a little less of a burden for your small business is by working with a financial advisor or accountant that can take care of them for you. That takes one thing off your place (although there is a cost incurred for this service). Another way to make taxes less of a burden financially is to plan for them by estimating what your payment will be and including that in your small business budget. This can make the process of filing and paying your taxes a little less painful.
Small business marketing challenges
Marketing is a must for small businesses looking to get new customers and keep them. Here are the most common marketing challenges small business owners face and how to overcome them.
7. Creating the right marketing plan
With so many different marketing channels to consider and different options available to market to your customers, it can be a huge challenge to create the right marketing plan. Where do you even start?
How to address it: Creating the right marketing plan comes down to understanding your marketing goals and objectives, knowing your audience, and identifying the right strategies that can help you be successful. Get our template below for help creating the right marketing plan:
8. Implementing your marketing strategy
Once you have a marketing plan in place, you have to actually implement it. There are a few different ways to do this—you can do it yourself, work with a marketing partner (or multiple marketing partners), or hire someone in-house. Many small businesses take a hybrid approach by going with all three, which presents its own set of challenges.
How to address it: The easiest way to overcome this challenge is to work with one marketing partner to run all your marketing for you. This streamlines your marketing plan and allows you to focus more of your time on addressing the other challenges you face daily. By working with one marketing partner, you can also get a better grasp of how all your marketing is performing to help you reach your goals.
9. Allocating budget across marketing channels
When you create your small business budget, you likely allocate a specific amount for marketing. But there are different pieces that make up your marketing budget pie—and those pieces can vary.
For example, you might have allocated $1,000 per month to search advertising and $800 per month to Facebook advertising, but you notice that your Facebook ads are outperforming your search ads and you want to make an adjustment. This requires a lot of time spent paying attention to your performance and time re-optimizing your campaigns as you move budget around.
How to address it: Again, working with a marketing partner can help with this. Especially one that uses AI to optimize your budget across channels for you automatically based on where your potential customers are engaging most—always diverting your budget to the strategies and channels that are driving the highest number of new customers to your business.
10. Measuring marketing success
In order to calculate marketing ROI and see the fruits of your marketing labor, you need accurate and robust reporting that can help you get the full picture of how your campaigns are performing. This is a challenge for small businesses because you have to aggregate reporting across your multichannel marketing strategy, with each channel focusing on different sets of metrics and measures for success.
How to address it: By implementing a good lead management system that allows you to track where your leads come from and aggregating your reporting into one dashboard, you can get a concrete look at your marketing performance. It’s also crucial to define the metrics that matter for each of your marketing channels and keep track of them regularly so you can focus on what’s most important for success.
Small business challenges: Getting, serving, and retaining customers
Without customers, your small business would fail. It’s as simple as that. You need customers to succeed. But customers present their own set of challenges, which we’ll cover here.
11. Getting new customers
Finding and getting new customers can be quite difficult. You have to know where to find them, how to appeal to them, and how to entice them to become your customer. Plus, the customer journey is always evolving and changing—especially as technology evolves and more channels emerge. This can be a major challenge for small businesses to keep up with.
How to address it: The right marketing strategy can help you find and win new customers by identifying where they’re spending time and delivering targeted marketing messages meant to drive action. The marketing plan we talked about creating a little earlier should help with this!
12. Retaining current customers
With so much competition, it can be a challenge to retain customers. But customer retention is important. It costs five to 25 times more to get a new customer than to retain a current one. That’s a lot!
How to address it: There are many different ways your small business can retain customers. One is by offering a customer loyalty program that rewards customers for frequenting your business. And another is by focusing on delivering the best customer experience possible. Nearly 90% of customers are willing to pay more for a good customer experience—and that’s something that will keep them coming back to your business.
Check out more customer retention strategies.
13. Addressing customer service issues
Customer service issues can cost your business. While they’re never fun to deal with and the customer may not always be right, it’s important to roll up your sleeves and take the time to turn every negative situation into a positive for your customers.
Plus, how you deal with customer service issues just might help you retain and attract more customers as 83% of people say they feel more loyal to businesses that resolve their complaints.
How to address it: Establish a process for addressing customer service issues—whether that’s routing them to a specific person on your team, offering a moneyback guarantee, or taking the time to listen to your customer to determine how to resolve their issue. This also goes for negative reviews—you want to respond and make things right so you can protect your online reputation.
Small business challenges: Balancing it all
One survey found that the top challenges for small business owners are lack of time off, uncertainty, and burnout. With all the challenges we’ve outlined already, it’s not hard to see why! Here are some ideas to address these challenges
14. Navigating uncertainty
We can certainly say that small business owners have felt this challenge in a new way over the last year and a half! The COVID-19 pandemic has made uncertainty part of daily life, and it shows little signs of letting up. In addition to the uncertainty around the pandemic, small business owners have to navigate economic uncertainty, natural disasters, community issues, and employee problems that make life feel unstable at times.
How to address it: As a person who has a plan for her backup plans, my best advice is to have a backup plan! This might include creating some plans and ideas around what to do in case of different events or emergencies (like a pandemic) to help keep your business surviving and thriving.
Here are some resources to help navigate uncertainty:
- Marketing During Times of Change: 4 Ways to Adapt Your Brand Strategy
- Creating Your 30-60-90-Day Plan [Free Guide]
- 6 Post-Pandemic Marketing Strategies with Long-Term Benefits
- How to Navigate Business Uncertainty
15. Avoiding burnout
This is a hard one. Your business is your life, but your life isn’t your business—make sense? It’s like the saying goes: You can’t pour from an empty cup. In order to take care of your business, you need to take care of yourself.
How to do it: Creating work-life balance is the best way to avoid burnout. Get tips to create work-life balance from an expert, like defining what’s truly important to you and making time for that.
16. Taking time off
Small business owners often feel as if they can’t take time off. You’re responsible for so much—who’s going to take care of things while you’re gone? Will you even be able to relax?
Taking time off and away from your business is a necessity. You need time to recharge—it just might give you new ideas for your business and a fresh outlook.
How to address it: Just do it! Easier said than done, right? Hiring the right people can help make this a little easier—if you trust your employees to take care of business while you’re away, it alleviates some of the panic you might feel giving up control to take some time off. You can also try taking a little bit of time off to start—an afternoon here, a weekday there.
Overcome these common small business challenges
These small business challenges aren’t going to go away—they’re part of running a business. But by addressing these challenges head-on with a concrete plan and some support, you can make running your business less challenging and more fun.