Entrepreneurship is on the rise in the U.S. In 2023, a record-breaking 5.5 million new business applications were filed. Retail trade industries witnessed the highest number of business applications, with over 978,000 new businesses registered.
Americans launching and running their own businesses might make you want to dip your toes into entrepreneurship. That would be a smart move since small business owners make between $83,178 and $126,515.
Starting a small business could make you financially stable. But the journey from inception to stability is often fraught with challenges. Not every business owner understands that, and as a result, their business fails to survive. Data shows that one in five companies fail to survive within the first year.
If you don’t want your business to be among them, you must understand the potential obstacles small businesses face. That can help you prepare and navigate your way to sustainable growth. Here, we’ll explore some challenges that may affect the survival of your small business.
#1 Economic Shifts and Inflation
All businesses are vulnerable to economic shifts and inflation. But small businesses are more so since they have limited resources and operate on a shoestring budget.
The Small Business Index Q2 2024 Quarterly Spotlight of MetLife & U.S. Chamber of Commerce shows that more than half of small businesses, or 55%, cite inflation as the top challenge. Businesses in manufacturing (58%) and services (65%) are more likely to consider inflation as a major concern than those in professional services (44%).
Consumer spending often decreases in the event of an economic downturn. This results in reduced sales and revenue for small businesses. If you’re running a business with limited cash reserves, this period could be challenging.
Inflation, on the other hand, increases the cost of goods, services, and raw materials, which can squeeze profit margins. You may struggle to pass these higher costs onto customers without losing competitiveness. In 2023, Debra Moore, the founder of Mama Moore’s Gourmet Popcorn, told Yahoo Finance that inflation made her pay 200% more for some essential ingredients.
Diversifying your revenue stream and maintaining a lean operational model can help you mitigate these risks. To secure better terms and pricing, build strong relationships with suppliers. Review and adjust your pricing strategy regularly. That will make sure your business remains profitable even in the face of economic fluctuations.
#2 Increasing Brand Awareness
When it comes to increasing brand awareness, small businesses face unique challenges in this arena. Their lean budgets make it difficult to compete with well-established brands. Increasing brand awareness is important for small businesses since it fosters trust. When customers trust a brand, they are more likely to keep coming back to it.
Building a robust online presence will help you boost brand awareness. Another survey by Statista disclosed that 21% of consumers rely on the internet to discover a local business daily.
A solid online presence can help you increase brand awareness. Building a website is a great way to establish a robust online presence. Consider building that. Nearly 25% of consumers discover new brands and products through their websites.
Web development costs anywhere between $300 and $5,000. As a small business owner working already on a budget, hiring a web developer can quickly drain your wallet. Instead, you can use AI-powered website builders.
These tools can create professional and engaging websites in as few as five minutes. Though AI-powered, the websites have a user-friendly interface. They are replete with high-quality images and SEO-optimized content.
Take, for example, you run a small photography business. To launch your photography website, Hocoos explains, you will have to answer a few questions to help AI wizards understand your unique needs. Then, it further elaborates you will have to pick a graphic template and choose layouts, fonts, and color palettes. Next, the website builder will do the heavy lifting, and your website will be ready in minutes.
Collaborating with influencers and other businesses can also help expand your reach and introduce your brand to new audiences. Hosting or participating in community events, both online and offline, can further enhance visibility and foster local support.
Invest in targeted advertising, such as Google Ads or social media ads. It can drive traffic to your site and increase brand recognition.
#3 Talent Acquisition and Retention
Attracting and retaining skilled employees is another significant challenge for small businesses.
Larger companies have the resources to offer higher salaries, better benefits, and more opportunities for career advancement. Small businesses, on the other hand, are often cash-strapped. They don’t have enough funds to offer competitive compensation packages, which makes it harder to attract top talent. This disparity puts small businesses at a disadvantage when vying for skilled professionals.
You can, however, counteract this by highlighting other attractive aspects of your work environment. You can offer your employees flexible working hours. Individuals seeking a better work-life balance will be drawn to your organization.
Another effective strategy is to work with an employer of record company, which manages employment-related tasks and labor law compliance, enabling small businesses to attract top talent more efficiently and without incurring high overhead costs.
Try creating a positive workplace culture where your employees feel valued and appreciated. This will increase retention rates.
To finish off, there are several challenges small businesses face, and these are just a few of them. Innovative approaches and meticulous attention can help you navigate these challenges and build a successful and sustainable business. Further, determination, resourcefulness, and a strategic approach can help you thrive and achieve long-term success.
