Small and medium enterprises (SMEs) face several hurdles when trying to grow:
- Cash flow problems
- Difficulty securing funding
- Hiring and retaining talent
- Technology adoption challenges
- Operational inefficiencies
- Entering new markets
Here’s how SMEs can overcome these obstacles:
- Improve cash management (invoice quickly, chase late payments)
- Explore alternative funding (grants, crowdfunding, P2P lending)
- Offer competitive benefits and clear career paths
- Invest in the right tech tools and train staff
- Streamline operations through automation and delegation
- Research new markets thoroughly before expanding
By focusing on these areas, SMEs can set themselves up for sustainable growth and success in today’s competitive business landscape.
Quick Comparison:
| Challenge | Solution |
|---|---|
| Cash flow | Better invoicing, payment terms |
| Funding | Alternative sources (grants, crowdfunding) |
| Talent | Competitive benefits, growth opportunities |
| Tech adoption | Invest in right tools, provide training |
| Operations | Automate tasks, delegate effectively |
| Market entry | Thorough research, start small and scale |
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How SMEs Grow
SMEs are crucial to many economies, but growing isn’t always easy. Let’s look at how these businesses can expand and boost their revenue.
Growth vs Scaling: What’s Different
People often mix up "growth" and "scaling", but they’re not the same:
Growth is about getting bigger by adding more stuff. Think of it like planting more trees in your orchard. You’re expanding, but your costs are going up too.
Scaling means growing your revenue faster than your costs. It’s like figuring out how to get more fruit from each tree without planting new ones.
Here’s a quick comparison:
| Growth | Scaling |
|---|---|
| Revenue and costs go up together | Revenue grows faster than costs |
| Usually needs more people and resources | Focuses on doing more with less |
| Grows step by step | Grows by leaps and bounds |
| Example: Opening a new store | Example: Launching an online shop |
Growth Idea says:
"A successful company with a scaling business model is one in which a company can grow at the same rate as its costs."
That’s why many SMEs are now trying to scale instead of just grow. It’s not about being bigger – it’s about being smarter.
Today’s Market Challenges
SMEs are facing some tough challenges in 2024:
1. Tech Transformation
The digital world is changing fast. AI and automation aren’t just fancy words anymore – they’re tools SMEs need to stay in the game.
2. Funding Squeeze
Getting money to grow is harder than ever. Banks aren’t lending as much, so SMEs need to get creative with how they find cash.
3. Talent Wars
Finding and keeping good people is still tough. It’s a bit easier now, but SMEs still struggle to compete with big companies for the best talent.
4. Market Slowdown
The B2B world is cooling off, which can hit SMEs hard. Companies need to work harder to keep their sales up.
But it’s not all doom and gloom. A recent survey found that 70% of UK SMEs are feeling good about 2024, expecting to grow their revenue by about 15% compared to last year.
To deal with these challenges, SMEs need to be quick on their feet and come up with new ideas. Here’s what’s working:
- Using AI: Companies like Moneypenny are helping SMEs use AI to make customers happier without spending a fortune.
- Finding New Ways to Get Money: With banks being stingy, platforms like Bionic are connecting SMEs with other lenders.
- Putting Money into Marketing: When business is slow, standing out is key. SMEs are focusing on making their sales process and customer service better to make every potential customer count.
- Going Online: Selling stuff on the internet isn’t just for big companies anymore. Many SMEs are doing well by selling to people all over the world online.
Lesley Davies, who knows a lot about helping companies grow, says:
"Those making this a priority will be well-positioned to rapidly comply with the inevitable legislation when it becomes compulsory; those who don’t, risk being overwhelmed and even caught out."
The main point? SMEs that can change quickly, use technology wisely, and find clever ways to get money and good people are the ones that will do well in today’s market. It’s not just about getting bigger – it’s about getting smarter.
Money Management Issues
SMEs often struggle with money management. Let’s look at two big problems and how to fix them.
Cash Flow and Working Capital
Cash flow keeps businesses alive. Without it, even profitable companies can fail.
Many SMEs face a weird problem: they’re profitable on paper, but broke in real life. Why? It’s all about timing. Money comes in too late, but bills are due now.
Here’s a scary fact:
"The median small business has enough cash to withstand only 27 days without cash inflows."
That’s cutting it close!
Working capital is the money you use for day-to-day stuff. It’s your short-term assets minus your short-term debts. A healthy ratio is between 1.5 and 2. But many SMEs can’t hit this target.
Here’s how to check your working capital:
Working Capital = Short-Term Assets – Short-Term Liabilities
If this number is always low or negative, it’s time to act.
How to Fix It
- Bill faster and chase late payments
- Give discounts for quick payment
- Get better deals from suppliers
- Don’t overstock
- Use tech to automate billing
Blake Rutledge, a CFO, says:
"When you offer early payment discounts or introduce late payment fees, you motivate your customers to pay you more quickly."
Good cash flow isn’t just about having more money coming in than going out. It’s about timing those flows so you always have enough cash on hand.
Getting Business Funding
Sometimes, your own cash isn’t enough. You need outside money. But that’s not easy these days.
Banks are picky about lending to SMEs. They think small businesses are risky.
Other Ways to Get Money
- Government Grants: Free money you don’t have to pay back
- Crowdfunding: Raise cash and test your product idea at the same time
- Peer-to-Peer Lending: Borrow directly from people online
- Invoice Factoring: Sell your unpaid invoices for quick cash
Grant Examples
- The National Association for the Self-Employed Growth Grant: Up to $4,000 for members
- Verizon’s Small Business Grant: $10,000 if you complete two educational tasks
Getting Ready for Funding
- Clean up your finances
- Write a killer business plan
- Network before you need money
- Consider hiring help
NerdWallet says:
"Applying may seem intimidating, but federal business grants are great opportunities for entrepreneurs looking to grow."
The big lesson? Don’t rely on just one funding source. Look at lots of options and be ready to change your plan if needed.
Daily Operations Problems
Running an SME isn’t easy. Daily operations can be a real headache, slowing you down and eating into your profits. Let’s look at some common issues and how to fix them.
Making Operations Work Better
SMEs often get stuck with inefficient processes. Here’s how to streamline your operations and boost productivity:
Delegate and Trust Your Team
Many SME owners can’t let go. They try to do everything themselves, which is a recipe for burnout.
The fix? Learn to delegate. Figure out what your employees are good at and give them those tasks. It makes them feel more responsible and invested in your company’s success.
ZipRecruiter can help you find the right people for specific jobs, making delegation easier. Once you’ve got your team, trust them to do their work.
Automate Repetitive Tasks
Automation is a big deal for SMEs. Let tech handle the boring stuff so your team can focus on what really matters.
Take CAFLOU, for example. It’s a business management tool that can automate a bunch of tasks. Their system can automatically assign tasks or process invoices based on certain conditions. It can even create recurring projects, tasks, income, and expenses.
"Automation tools are a smart investment if you want to free your team from mundane tasks and let them focus on high-impact work." – CAFLOU® academy
Consolidate and Batch Tasks
Jumping between different tasks kills productivity. Try grouping similar tasks together instead. For example, set specific times to check and answer emails rather than doing it randomly throughout the day.
Tools like Asana can help you organize and batch tasks, which can really boost your focus and efficiency.
Embrace Change and Keep Improving
The business world doesn’t stand still, and SMEs need to keep up. Be ready to change your processes and strategies as new challenges and opportunities come up.
Set up a system to regularly review and improve your operations. This could be weekly team meetings to talk about what’s working and what’s not, or using data to spot areas that need improvement.
Use Technology Wisely
The right tools can make your operations much more efficient. Here are some examples:
| Tool | Function | Benefit |
|---|---|---|
| Whiplash | Fulfillment | Makes order processing and shipping smoother |
| Calendly | Scheduling | Cuts out the back-and-forth emails when setting up meetings |
| QuickBooks | Financial Management | Makes accounting easier and gives you financial insights |
| ActiveCampaign | Email Marketing & CRM | Combines advanced marketing features with customer management |
Remember, you don’t need to use every tool out there. Just pick the ones that solve your specific operational problems.
Streamline Communication
Good communication is key for smooth operations. Think about using a central communication platform like Slack or Microsoft Teams. This can cut down on email overload and make it easier for your team to work together and share information quickly.
By focusing on these areas, you can really improve your daily operations. As Stefano Maifreni, CEO and Founder of Eggcelerate, says:
"By focusing on small operational efforts, SMEs can overcome challenges and achieve remarkable prosperity."
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Staff and Skills Gaps
SMEs often struggle with hiring and developing their workforce as they grow. Let’s look at some ways to tackle these challenges.
Better Hiring Methods
Finding and keeping great employees is key for SME growth. Here’s how to improve your hiring:
Build a Strong Employer Brand
Your reputation as an employer matters. Here’s what you can do:
- Create a career page on your website showing off your company culture
- Share employee stories on social media
- Highlight your company’s mission in job postings
Use Tech to Your Advantage
Modern tools can make hiring easier:
- Applicant Tracking Systems (ATS) help manage applications
- AI tools can screen resumes
- Video interviews save time and reach more candidates
Offer Great Benefits
You might not be able to match big company salaries, but you can still attract talent:
- Offer flexible hours or remote work
- Provide chances to learn and grow
- Include perks like wellness programs
Hire for Culture Fit
Finding employees who fit your company culture can help them stay longer. Try using personality tests or structured interviews to see if a candidate matches your values.
"As an SME, you can personalize your employee value proposition and mix up your hiring process to get and keep the talent you need."
Look Beyond the Usual Places
Think creatively about finding candidates:
- Team up with local colleges for internships
- Hire freelancers for specific projects
- Consider apprenticeships to train new talent
Staff Learning Programs
Helping your current employees learn new skills is often cheaper than always hiring new people. Here’s how to create good learning programs:
Figure Out What Skills You Need
Start by identifying the skills your team needs to grow:
- Ask employees what they want to learn
- Check job descriptions against your team’s current skills
- Look at industry trends to see what skills you’ll need in the future
Offer Different Ways to Learn
People learn in different ways. Give your team options:
1. Online Learning Platforms
Give access to online courses through sites like Coursera or LinkedIn Learning. Employees can learn at their own speed.
2. Bite-sized Learning
Break big topics into small chunks. This works well for busy employees who can’t spend hours on training.
3. Learning on the Job
Pair newer employees with experienced ones for hands-on learning.
4. Mentoring
Set up mentoring relationships in your company to help employees grow and share knowledge.
Check How It’s Going
Regularly see how well your learning programs are working:
- Look at how many people finish courses and what they think
- See if job performance improves
- Change your training based on what you learn
"When SMEs give workers good training opportunities, it often makes them more loyal and likely to stay." – Jane Gratton, British Chambers of Commerce
Make Learning Part of Your Culture
Create an environment where people want to keep learning:
- Celebrate employees who learn new skills
- Give time during work for learning
- Link new skills to career growth opportunities
Tech Update Challenges
SMEs face big hurdles when adopting new tech. Let’s look at the problems and some real solutions.
Planning for Digital Tools
Picking the right tech isn’t easy. Here’s how to tackle it:
Know What You Need
First, look at where your business is struggling. Ask your team – they know what’s slowing them down.
Is your sales team buried in data entry? A CRM might help. Missing project deadlines? Try project management software.
Pick Tools That Work Together
Don’t end up with a bunch of tools that don’t talk to each other. That’s a recipe for headaches.
Look for software that plays nice with what you already use. APIs and pre-built integrations are your friends here.
Start Small, Then Grow
Don’t try to change everything at once. Pick one area and focus there. It’s less overwhelming and easier on your budget.
Take First Philippine Holdings (FPH). They needed to go digital fast during the pandemic. They started with Kissflow for a few processes. Now? They’ve automated over 100 office tasks and handle 1,000+ paperless approvals each month.
"Our partnership with Kissflow helps improve operational and process efficiency that, in turn, enhances how we serve our customers and vendors", says Joseph Arnel Chavez, Assistant Manager at FPH.
Train Your Team
New tech is useless if no one knows how to use it. Make time for training. Bring in experts or create in-house "super users" to help others.
Simple guides for common tasks can be a big help, too.
Use AI, But Be Smart About It
AI isn’t just for the big guys anymore. SMEs using AI are pulling ahead. Salesforce found that top companies are using AI twice as much as others.
But pick AI that fits your goals. Moneypenny, for example, uses AI to help SMEs improve customer service with things like message summaries.
Lesley Davies from ECI warns:
"In 2024 it’s going to be critical for SMEs to develop their own risk analysis and governance frameworks when it comes to artificial intelligence."
Don’t Forget Security
As you add new tech, keep security in mind. AI-powered attacks are on the rise, so protect your digital stuff.
Get good cybersecurity – firewalls, antivirus, and train your team on best practices. One data breach can wreck an SME’s reputation and bank account.
New Market Entry Problems
Expanding into new markets can be a game-changer for SMEs, but it’s not a walk in the park. Let’s look at the main challenges and how to tackle them.
How to Enter New Markets
Entering a new market isn’t just about selling your product somewhere new. It’s about understanding a whole new playing field. Here’s how to do it right:
Do Your Homework
Before you dive in, you need to know what you’re getting into. This means solid market research. Fred Schebesta, CEO of finder.com, learned this the hard way:
"I ended up going to the U.S. three times so I could be on the ground and get a real feel for the place before launching."
Don’t just rely on Google. Get out there and talk to potential customers. Use surveys, focus groups, or even casual chats to gather insights.
Understand the Culture
Cultural differences can make or break your market entry. What works at home might flop elsewhere. Take Starbucks, for example. When they entered New Zealand in 1998, they didn’t just open a store. They licensed a local company, Restaurant Brands New Zealand Ltd., to run their first Auckland location. Smart move to navigate local tastes and business practices.
Adapt Your Payment Methods
Different markets, different payment preferences. Ignore this, and it’ll cost you. Schebesta shares another lesson:
"When launching in the U.K., we outsourced work to a lot of freelancers around the globe to get things up and running. When payment time came around, we lost a lot of money to wire transfers and were hit by terrible currency exchange rates."
Team up with local payment providers to get the lay of the land.
Start Small, Then Scale
You don’t need to conquer the whole market overnight. Take a page from Red Bull’s book. They started by exporting to neighboring countries like Slovenia and Hungary before tackling bigger markets like Germany and the UK. This step-by-step approach lets you test the waters and fine-tune your strategy.
Leverage Local Partnerships
Finding the right local partners can fast-track your success. Netflix nailed this when expanding internationally. They teamed up with local companies to navigate regulations and compete with established players. Now, they’re in over 190 countries.
Set Clear Goals
Before you jump into a new market, know what success looks like. As market entry expert Biltchik says:
"One of your purposes is to figure out why buyers should buy your product or service, versus from someone local or a competing exporter."
Set specific targets for sales, market share, and timeline. This gives you a roadmap and helps you track progress.
Be Ready to Pivot
No matter how well you plan, things won’t always go smoothly. Be ready to adapt. As Schebesta puts it:
"Each mistake is the opportunity for new learning, and if you’re not making mistakes you’re not trying hard enough."
Keep a close eye on your performance and be ready to change course if needed.
Entering a new market is tough, but with the right approach, it can be a game-changer for your business. Do your homework, understand the culture, adapt your methods, start small, find local partners, set clear goals, and be ready to pivot. It’s not easy, but the rewards can be huge.
Key Takeaways
Growing an SME isn’t easy. But with the right approach, you can tackle common challenges head-on. Here’s what you need to know:
Keep Your Cash Flowing
Cash flow issues can sink a small business fast. To keep your finances healthy:
- Make a budget and stick to it
- Check your financial statements often
- Give customers a reason to pay early
- Keep a close eye on your inventory
Here’s a pro tip: It’s WAY cheaper to keep your current customers happy than to find new ones. Focus on customer retention to keep your cash flow steady.
Use Tech to Your Advantage
Companies that embrace new tech are seeing big wins:
- Profits up by 16%
- Market value jumping 7%
You don’t need fancy systems. Cloud-based tools can streamline your work and free up time for big-picture thinking. For example, First Philippine Holdings automated over 100 office tasks and now handles 1,000+ paperless approvals each month.
Find and Keep Great People
Hiring is still tough for many businesses. To attract and hold onto top talent:
- Pay well and offer good benefits
- Show clear paths for growth
- Create a workplace people love
- Ask your team for referrals
Get Serious About Digital Marketing and SEO
In today’s online world:
- 81% of people research online before buying
- Companies that focus on SEO are 60% more likely to hit their business goals
Invest in your online presence. Make sure people can find you easily. And don’t forget about targeted ads – they can boost responses by up to 400%.
Roll with the Changes
The way people shop is changing. 75% of consumers want a smooth experience whether they’re online or in-store. Make sure your marketing works across all channels.
Grow Smart, Not Just Fast
Scaling too quickly can cause big problems. Take time to build a strong foundation:
- Use proper accounting methods
- Set clear business strategies and budgets
- Choose KPIs that match your goals
As Greybull Stewardship puts it:
"Scaling a small business takes patience, focus, and teamwork."
FAQs
How do you overcome problem with small scale business operation?
Small businesses often struggle with operational issues. Here’s how to tackle them:
Keep cash flowing. It’s the heart of your business. Invoice quickly, chase late payments, and maybe offer discounts for early birds. Paul Young, CPA CGA, says:
"SMEs must comply with and navigate various regulations and laws. This can be expensive and time-consuming as you’ll need to ensure you’re meeting tax and employment regulations."
Use accounting software to stay on top of finances and regulations.
Invest in your team. Good employees can make or break you. Richard Branson puts it simply:
"If you look after your staff, they’ll look after your customers. It’s that simple."
Pay well, show clear career paths, and train your people. It’ll help you attract and keep the best.
Use tech to your advantage. First Philippine Holdings automated over 100 office tasks and now handles 1,000+ paperless approvals each month with cloud tools.
Think beyond bank loans for funding. Look into angel investors, crowdfunding, or Rollovers as Business Startups (ROBS).
Focus on what you do best and outsource the rest. It can cut costs and boost efficiency. Guidant notes:
"The key to success is setting up reliable systems and adapting to the current economic landscape."
Don’t forget cybersecurity. With 82% of data breaches linked to human error, train your team on staying safe online.
