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9 Top Small Business Challenges (and the Secrets to Overcoming Them)

By Roy Rasmussen Reviewed By Erin Ryan
By Roy Rasmussen
By Roy Rasmussen Reviewed By Erin Ryan

As a small business owner, you’re resilient, but hurdles are bound to show up on your path to success. The key to passing them in leaps and bounds is to know what they are before they get in your way. That’s why we’re letting you in on 9 of the top small business challenges entrepreneurs face:

  1. Finding financing
  2. Experiencing cash-flow problems
  3. Combining business and personal finances
  4. Generating sales
  5. Acquiring new customers
  6. Retaining existing customers
  7. Automating business processes
  8. Maintaining an online presence
  9. Managing digital security challenges

We’re breaking down these business problems with examples and sharing how to overcome these obstacles so you can stay ahead.

1. Finding Financing

The life of a business depends on cash flow. You need money to make money. However, finding financing can be one of the biggest financial challenges faced by small businesses. It can also be a challenge businesses face when they’re trying to weather a downturn in revenue.

Most recently, with the U.S. Small Business Administration’s (SBA) COVID-19 Economic Injury Disaster Loans, only 3.2 million of more than 14 million loan requests had been approved by the close of July 2020. That’s approval of approximately 23% of all applications, equating to about three-quarters of applicants being denied for funding.

Solution

One way to counter this challenge is to improve your credit score. However, a common underlying issue causing small business owners to be denied financing is a lack of understanding of how your business credit score can impact your loan application.

Just as you have a personal credit score, your business has a credit score as well. The major business credit-rating firms are Dun & Bradstreet, Equifax and Experian. Each uses a scale of 0 to 100 to measure your score.

FICO, which also tracks personal credit, provides a Small Business Scoring Service (FICO SBSS) to help lenders evaluate loan applicants using a scale of 0 to 300.

Ways you could improve your business credit scores include the following:

  • Improving your personal credit score, which factors into your SBSS score
  • Using a business credit card to pay for business expenses
  • Applying for a Dun & Bradstreet D-U-N-S number, which can be used to track your business credit score

Image of an hourglass with a dollar sign in the top part and the words Cash Flow amid the words Small Business Challenges

2. Experiencing Cash-Flow Problems

After you’ve found financing for your business, managing your cash can be equally challenging. This is another one of the challenges (and opportunities) of small businesses. 

Indeed, cash-flow challenges caused many firms difficulty with the following, according to the Federal Reserve Banks’ 2021 Small Business Credit Survey:

  • Paying operating expenses: 65%
  • Making payments on debt: 44%
  • Paying rent: 43%
  • Purchasing inventory or supplies: 9%

Solution

It’s important to take steps such as these to avoid cash-flow crunches:

  • Track your cash flow.
  • Use cash-flow statements so you know how much money is coming in and going out at any given time.
  • Make realistic sales projections based on past performance, not wishful thinking.
  • Proactively collect accounts receivable you’re owed.
  • Minimize expenses whenever possible through strategies such as outsourcing and automation.
  • Keep enough emergency funds available to cover your expenses for a few months during a cash slowdown.

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3. Combining Business and Personal Finances

Cash-flow crunches can emerge from mixing business and personal finances. This makes it easy to accidentally spend money your business needs on personal expenses. It also makes it harder to track how much money your business has and how much you’re spending — another one of the common challenges of entrepreneurship.

Solution

You can keep your business and personal finances separate by following some simple strategies:

  • Create separate accounting spreadsheets for your personal and business finances (or make your personal expenses a separate line item so you can easily track each separately).
  • Use a separate storage system for business financial paperwork.
  • Create separate business checking and credit card accounts — and use them exclusively for business items.
  • Set a salary ceiling for yourself and stick to it.

4. Generating Sales

Other top small business problems to solve revolve around growing your business through marketing and sales. Business success depends on sales revenue, but many small businesses fall short of their sales goals. 

Not surprisingly, the 2 top priorities for small businesses in 2022 include increasing online sales (40%) and improving marketing results (39%), according to a recent QuickBooks survey.

Solution

Fundamental strategies for improving your sales results include:

  • Setting measurable sales goals and tracking your team’s performance with analytics tools
  • Standardizing your sales process so your sales representatives know what steps to take to generate sales
  • Using sales scripts so your sales representatives know what to say to probe for customer needs, present product benefits, answer objections and close sales
  • Using sales automation tools, such as software for customer-relationship management
  • Scheduling lead-generation and sales appointment activity to ensure your team is taking enough action to achieve the desired results

5. Acquiring New Customers

To meet your sales goals, you need to connect with a sufficient number of prospects. Many companies fall short on this front, though, leading to another one of a small business owner’s biggest challenges.

Solution

To draw more new customers, consider:

  • Increasing online marketing activity to grow your social media following and drive more traffic to your website
  • Encouraging social media followers and website visitors to follow you and sign up for your email list, so you can pursue follow-up marketing efforts with them
  • Creating compelling sales offers
  • Testing which marketing and sales campaigns generate the best results

6. Retaining Existing Customers

It’s less expensive to keep current customers than gain new ones. Unfortunately, many companies lose a significant number of customers a year, making customer retention a common business problem.

Solution

You can retain more customers by adopting the following strategies:

  • Offering superior customer service by leveraging technology, such as chatbots and interactive voice response, to reduce customer wait time
  • Measuring customer service performance by tracking variables, such as average call wait time
  • Soliciting and tracking customer feedback
  • Periodically extending special offers to current and past customers
  • Offering loyalty reward discounts and incentives to regular customers

7. Automating Business Processes

In today’s high-tech environment, an increasing number of small business problems involve technology. Automation can help companies save time, increase efficiency and cut costs.

However, many businesses find automating their processes challenging. Apple subsidiary FileMaker’s Workplace Innovation Report noted 96% of companies struggle with their business processes.

Solution

To make automation easier, follow a step-by-step approach:

  • Establish who in your organization or your outsourcing network will be responsible for handling automation.
  • Review your business processes and identify repetitive, routine tasks that can be automated:
    • Updating your bookkeeping records
    • Publishing content to social media
    • Handling routine customer service inquiries
  • Set measurable goals for what you’d like to accomplish through automation, such as how much time you’d like to save on specific processes.
  • Establish key performance indicators to measure and track automation goals.
  • Compare solutions and choose the best tools to achieve your goals.
  • Schedule a phased timetable for implementing new solutions, testing on a small scale before rolling out across the organization or customer-facing interface.
  • Codify standard operating procedures for using new automation technology and train relevant staff in these procedures.
  • Track implementation results with analytics software.

Moving image of a tablet and the words Online Presence in the center of the screen with the words Small Business Challenges all around

8. Maintaining an Online Presence

With online retail sales becoming an increasingly significant revenue source, having a digital presence has become increasingly critical to compete for customers.

Nearly 28% of small businesses, though, still don’t operate a website. That’s according to a 2021 report by Top Design Firms, a directory of design, marketing and development firms.

Cost is one of the top factors standing in the way for many business owners.

Solution

Here are several solutions to face one of today’s business challenges head on:

  • If you’re on a shoestring budget, consider do-it-yourself solutions, such as Blogger, Wix and WordPress.
  • If you can afford between $1,000 and $10,000, the least expensive route is hiring a freelancer to build a website or blog.
  • If you need a more robust, customized solution or don’t want to manage your own site, hire a web design agency or full-service digital agency.

9. Managing Digital Security Challenges

Security is another one of the top difficulties faced by small businesses and presents an increasing challenge for small businesses. Cyber thieves now aim 28% of their attacks at small businesses, according to a report by Verizon.

Solution

To protect your company from online predators, it’s important to follow these digital security best practices:

  • Enable a firewall to prevent unauthorized users from accessing your company’s network.
  • Use strong passwords with at least 10 characters and a mix of uppercase and lowercase letters, numbers and punctuation, supplemented when possible by multifactor authentication, such as a personal Identification number sent through an authentication email.
  • Use a secure connection, such as an encrypted virtual private network, when connecting to the internet rather than an unsecure connection, such as a public Wi-Fi server.
  • Keep operating systems and software apps up to date to incorporate the latest security fixes.
  • Run an antivirus program on company devices.
  • Avoid suspicious links or email attachments.
  • Use spam filters to block suspicious emails.
  • Regularly back up files in the event a cyberattack blocks access to or deletes files.
  • Require workers to use secure mobile devices and apps.
  • Enable remote file wipe capability for company files in the event a device gets compromised.
  • Train workers to follow cybersecurity procedures.

Overcome Potential Problems in Business With Smart Strategies

While potential obstacles to business success are numerous, determined entrepreneurs can overcome them by pursuing smart strategies. In many cases, overcoming business obstacles will require investing capital. If you need financing to achieve your business goals, be sure to check out Fast Capital 360’s funding options.

Roy Rasmussen Contributing Writer for Fast Capital 360
Roy is a respected, published author on topics including business coaching, small business management and business automation as well as an expert business plan writer and strategist.
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