Top Challenges Faced by SMEs and How to Overcome Them
Challenges SMEs face can be considered opportunities; opportunities to adapt, innovate and grow, faster than your competition. Keeping ahead of your competition as much as you can is essential to business success. Here are a few of the areas you can focus on:
Cash Flow Management
Cash flow is at the heart to the success of your business, but managing it can feel like a constant juggling act. With issues such as late payments, unexpected expenses, and often inconsistent revenue streams, things can quickly lead to financial strain.
Ways to Overcome It:
Get clear on your numbers. Use reliable accounting software to track income and expenses in real-time. This sounds like such a simple solution, but so many of the SME business owners I speak to do not have a real time overview of their financial position. Without this information decision making for your business comes with significant risk. Out of all of our recommendations, this is something we advise you do straight away.
Implement stricter payment terms. Many businesses have payment terms that are too long. Do not be afraid to shorten invoice periods, with penalties for late payments. This does require some additional admin, but it forces you to keep on top of your payments. Also introduce a process for chasing payment, preferably automated.
Build a financial cushion. This is difficult for many, but do your best to save 3-6 months’ worth of operating costs to help you in times of unexpected expenses or a drop in revenue. It is also a good idea to do a risk assessment, and get a list of potential costs that could crop up and a way to resolve them quickly. Do the research now for potential suppliers and ways to solve issues before they occur. That will lead you to be able to react quickly but not rashly spending more than necessary just for ease or speed. Being able to react quicker than your competitors keeps you one step ahead.
Seek expert advice. A consultant can help you forecast, budget, and plan for the future. Sometimes just a second eye on the information you already have may be able to identify areas you need to improve or where the most risk is in terms of your finances.
Navigating Regulatory Compliance
From GDPR to health and safety standards, the regulatory landscape in the UK can be complex. Staying compliant can be time-consuming, and confusing, along with a worry of penalties.
How to Overcome This Worry:
Stay informed. Regularly check government websites and industry updates for changes in regulations. There are often government newsletters you can sign up for too that can help keep you informed. This is also a great reason to develop a network of those in the same industry as you, to ask each other questions and share updates when you get them.
Invest in training. Ensure you and your team are up-to-date on key compliance areas. Keep an eye out for training in these areas. There is often free and/or funded training for things like this provided by the government.
Use technology. Compliance management tools can simplify documentation and reporting.
Hire help if needed. For peace of mind, consider consulting with a legal or compliance expert.
Attracting and Retaining Great Employees
Hiring the right people is essential for the growth of your business, but as an SME it is often a struggle to compete with larger companies offering higher salaries and robust benefits. Having said that, the type of people you want to work for your organisation at this time of growth is less likely to be attracted to a larger corporation for employment. You just need to clearly communicate what you can offer.
How:
Highlight your unique culture. SMEs often offer a more personal, dynamic work environment—showcase that in your job postings. More accountability, more input and a sense of job satisfaction is likely to be much higher than in a larger organisation.
Invest in employee development. Offer training, mentoring, and clear progression paths to demonstrate long-term value. Talk about how they have input into how to develop the role, growing with your business. If they have an idea that makes sense to your business, let them run with it if you can. Job satisfaction is much higher in this circumstance and is likely to increase retention. Allowing your employees to take ownership of projects can encourage respect and trust which all add up to a better and more satisfying work environment. Read more about this and the benefits of having a positive company culture here.
Be flexible. By embracing things like remote work, flexible hours, or other perks that appeal to those looking for employment you are able to be more appealing than some corporations that are restricted by company wide policies. This will also provide for a happier, healthier and more engaged workforce who is less likely to want to move on.
Focus on retention. Communication is key for this. Make sure you have regular check-ins, be sure to foster a culture of recognition, and create a positive culture. Yes, it might be hard to find employees you can trust and who work hard, but it is even more important to acknowledge how hard it is to keep them.
Standing Out from Competitors
Identifying and communicating your niche is something many clients struggle with the most. You would think if you are passionate about what you do, it would be easy to let people know about it, but sadly it is much more complicated than many think. Unfortunately ‘marketing’ is often considered to be easy to do, but to be effective, concentrating on ROI and having the budget to do these things is often the hardest part of owning a business.
Basics of How to Overcome It:
Know your audience. Conduct market research to understand your customers’ pain points, needs and wants. DATA IS KEY.
Refine your brand. Ensure your messaging, visuals, and values resonate with your target audience.
Leverage multi channel marketing, don’t forget about more traditional forms - it isn’t all about digital. Yes, SEO (search engine optimisation), email campaigns and social media can be effective ways to connect with your audience. It is important to remember that it takes approximately three different touch points for your customer to start to actually take in information you are giving them. For many local businesses more traditional forms of marketing also work, but are often forgotten about. Try a combination of both.
Seek feedback. Use customer reviews and surveys to refine your offerings and build loyalty. Marketing is not just about the initial brand awareness or lead generation, it is about developing a relationship with your customers. Creating a feedback loop allows you to gather additional data and find ways to improve and grow your business.
Adapting to Technological Change
Technology is always changing and improving. It is important that you do not get left behind your competitors. If they find new, cost effective and increased efficiency faster than you then that can be a real challenge for your business. This is particularly a problem with tight budgets, so we always recommend, if possible, having some cash available to invest in technology as and when you need.
How to Overcome It:
Prioritise tools with a Return On Investment. Invest in software and technology that will have a direct impact such as improving productivity, customer experience, or creating cost savings.
Stay curious. Pay attention to new tech trends and fully assess their relevance to your business. What may work for some may not work for you, so make sure you don’t just ‘jump on a bandwagon’. The increase in popularity of AI is an example of this. For many a lack of understanding on what AI actually is and how it works has been a significant disadvantage. Do not just invest in AI because it is ‘on trend’. You want to make sure that it would benefit your business and the way you work.
Train your team. Make sure all your staff are comfortable using new tools to maximise their effectiveness. A lack of training in and understanding of new systems can be a significant issue in the long run. For example, implementing a new CRM system (customer relationship management system) and not using it correctly means you can lose significantly important data. We have seen this happen before and it can be of incredible detriment to your business.
Don’t do it all at once. Implementing changes is a process, and should be managed incrementally to avoid overwhelming your business operations and employees. You want to make sure that something is implemented company wide before anything new is added to ensure quality control and working out any kinks.
Our Totemo Consulting Approach
Every challenge your SME faces has the potential to be a stepping stone to growth when approached with the right mindset and strategy. At Totemo Consulting, we help SMEs across the UK tackle these hurdles with clarity and confidence.
From cash flow strategies to refining your talent acquisition process, we are here to help you transform challenges into opportunities. Get in touch to chat about how we can support you and your business goals.