9 Business Challenges Every Small Business Struggles With (And How to Fix Them)

In the first few years of business, small companies come up against a lot of different challenges. Some are harder than others to overcome — and, according to the U.S. Bureau of Labor Statistics, about 20% of small businesses fail by the end of their first year. By the end of their fifth year, 50% go under; and by the tenth year, that number rises to 80%.

With those survival rates, it’s easy to see why folks face the first few years of business with trepidation. But, many common business problems and challenges are actually fixable. Many times, you’ll find you need to take a step back, assess your pain points, and rethink your strategy. 

In this post, we’ll discuss common challenges that small businesses may face, along with tactical advice about how to fix them.

1. Finding Customers

This first one isn't just a small business problem. The marketers at well-known companies like Apple, Toyota, and McDonald's don't just sit around waiting for the leads to come in — even the biggest, most successful companies have people working hard every single day to find new customers.

But, for small businesses, the challenge is even more significant. How can you find customers when you’re not a household name? And, there are so many channels to focus on for acquisition, but how do you know what to prioritize?

In addition, acquisition costs are incredibly high, and small businesses may not have the same spending power as larger, more established businesses. In fact, the cost of acquiring new customers has increased almost 60% over the past six years. If this is something you’re struggling with, you’re not alone: 49% of companies report that customer acquisition is their primary marketing objective. 

How to Fix It:

Finding customers starts with figuring out who your ideal customer is. Even with the best small business ideas, spraying and praying doesn't work for anybody — you need to make sure you're spreading the word to the right people.

Craft an idea of what your target customers look like, what they do, and where they spend time online by building your buyer personas. This free guide will walk you through the process and provide customizable templates to fill out and create representations of your ideal customers.

Creating very specific templates can dramatically improve your business results. Once you’ve built your personas, you can begin creating content that caters specifically to your target demographic and share it in the channels you know they’re in, with the messages you know they care about.

2. Increasing Brand Awareness

If your customers don't know who you are, how will they buy from you? Statistics show that, in terms of success, 70% of brand managers say that building an audience is more valuable than direct sales, and, because of this, marketers in 2021 say that their primary goal for running marketing campaigns is building brand awareness. 

This focus is largely because building brand awareness helps generate trust with your audience, helps them associate your brand with your products and services, and those factors combined help drive sales and build a base of loyal customers. 

As a small brand, it can sometimes seem like today's biggest names seemed to have popped up out of nowhere. How did they become a household name? How did they grow that quickly? Can your business grow like that, too?

Of course, most of these companies' hard work, failures, and rejections happened behind the scenes. But, there are strategies for spreading the word about your brand and building an excellent reputation that you can start using right away.

How to Fix It:

There are many ways to spread brand awareness, but the three I'll touch on here are PR, co-marketing, and blogging.

• PR: Public relations is less about paying for a spot in a news blog and more about focusing your voice and finding your place in the market. I recommend reading this great post from FirstRound Capital on what startups and small businesses often get wrong about PR. The piece also includes some tactical tips on how to figure out who's covering your industry, building relationships, and working with reporters. You can also download our free public relations kit to learn how to maximize your public relations efforts with inbound marketing and social media.
• Co-marketing: Partnering with another brand will help you inherit some of their image and reputation and create brand evangelists outside your circle. It's a fantastic way to gain a large volume of new contacts alongside your organic marketing efforts. You can read our ebook on how to get started with co-marketing for more helpful information.
• Blogging: Running a consistent, high-quality blog will also help you build brand awareness. Not only does a blog help drive traffic to your website and convert that traffic into leads, but it also enables you to establish authority in your industry and trust among your prospects. It'll also help you build an email list, which brings us to our next point...

3. Building an Email List

To move prospects along their buyer's journey to eventually become your customer, you need to build trust through consistent nurturing, staying top of mind, and continuously providing value. Marketers say that one of the best ways to do this is by getting prospects on your email list. 

Email marketing is still ranked as the most effective marketing channel, and for every $1 you spend on email marketing, you can expect an average return of $42. In addition, 59% of consumers say that marketing emails can either directly influence their purchasing decisions.

Despite these statistics, the average email marketing database degrades by about 22.5% each year. As a marketing team, it is your job to find ways to maintain and constantly add fresh, new email contacts to your list.

But, what many people call "building an email list" is buying an email list — and buying an email list is never a good idea. I repeat: Never a good idea. Not only will your email deliverability and IP reputation be harmed, but it's also a waste of money. If your current strategy is to buy or rent email lists, it's time to regroup and find better places to put those resources.

How to Fix It:

Instead of buying or renting lists, build opt-in email lists. An opt-in email list is made up of subscribers who voluntarily give you their email address so you can send them emails. These customers are already interested, and interested customers are more likely to make purchases, especially with nurturing. For interested customers, you could start nurturing your relationship with HubSpot or alternative tools with email sequences.

The act of opting in necessitates website functionality that captures their email address. You can achieve this with a form builder or other conversion tool (more on that later).

You can also leverage social media platforms that you know your audience is already on, like Facebook or LinkedIn, and create enticing content that inspires them to sign up for your email list. 

The other piece of the puzzle is creating demand. As mentioned above, you can do this by creating great blog content and making it easy for people to subscribe. In turn, blogging will help you increase your online presence, build up search authority, and create evangelists from your content.

You can also revive older lists that you think are mostly decayed by creating an engaging opt-in message and sending it to your old list encouraging contacts who wish to re-opt-in, and promising to remove all contacts who don't respond.

Growing your email list doesn't necessarily translate into increasing your list of sales-qualified leads, which brings me to my next point...

4. Lead Generation

Another problem most small businesses share is lead generation — specifically, generating enough leads to keep the sales team happy. Marketers also report that this is a top priority, but, at the same time, 58% also indicate that lead generation is a key challenge that business leaders face.  

Given this, generating leads that are both high quantity and high quality is an important objective. A successful lead generation engine turns website visitors into prospective customers and provides a steady stream of sales prospects while you sleep.

How to Fix It:

To make the lead generation process work for your business, you need to first optimize your existing website for conversions. Your website is the most essential tool you have for turning prospects into customers. Look through your website and ask yourself:

• Do each of your webpages clearly guide visitors to take action, or do they leave them wondering what to do next?
• Do you use a tool that automatically pulls the submissions from your forms and puts them into your contact database, like HubSpot's free lead generation tool?
• Are you creating custom landing pages for every single campaign that you run?
• Do you have lead generation CTAs on each of your blog posts? (Do you have a blog at all?)

Prioritize the most popular pages on your website first. Most businesses have a few specific pages that bring in most of their traffic — often the homepage, "About" page, "Contact Us" page, and maybe one or two of your most popular blog posts. This blog post will help you figure out which pages to prioritize and how to optimize them.

Then, implement conversion tools such as: 

• Pop-ups
• Hello bars
• Slide-ins

Finally, be sure to take advantage of free lead management software and apps for startups. Affording marketing, in general, is a big challenge in and of itself, so finding and implementing the most robust free marketing tools can be a game-changer.

5. Delighting Customers

Customer satisfaction is a great goal, but customer delight is even better: 

• Positive service experiences entice customers to make additional purchases and repeat loyal customers spend more,
• Satisfied customers engage in word-of-mouth marketing, helping you with free acquisition,
• It’s cheaper to retain an existing, satisfied customer than it is to acquire a new one.

Unfortunately, as a small business, it can be tough to delight customers in the way they desire. A lack of employees or dedicated service teams to help customers can make it challenging to keep up and solve their issues. A lack of capital can make it challenging to create programs that customers enjoy, like loyalty programs. 

To achieve true customer delight so that your customers become promoters of your business, you must surpass expectations and deliver an unmatched experience.

How to Fix It: 

It takes work to continue solving for your customer in a way that turns them into raving fans. Here are some steps to get you in the right mindset: 

• Understand why your customers chose you and what they need
• Set concrete expectations at the start of the engagement
• Deliver on those expectations (and satisfy your customers' needs)
• Innovate how you can provide unexpected extras that go above and beyond
• Continue to measure satisfaction and improve the customer experience

When you understand your customers’ needs, expectations, and cater to their desires, it will pay off, as you will reduce customer churn and instead inspire loyalty. 

6. Hiring Talented People

52% of respondents to a CNBC study stated that the most significant problem facing small businesses was labor quality. This is a tough statistic to consider, especially since most of the challenges on this list can’t be overcome without a fantastic team that understands business goals and can work together to meet them. 

To begin with, 76% of hiring staff say attracting quality candidates is their biggest challenge. In addition, the cost of onboarding can average more than $4,000 per new employee, which is troubling for those operating with smaller budgets. If you have high employee turnover, you’re spending more money hiring talent than you would like.

How to Fix It:

It’s easy to hire with a short-term mindset: send out a job description, screen applicants, and make a decision. But, because of the high costs of hiring, it's crucial to invest a significant amount of time in the hiring process. Don’t settle for good employees when you can find great ones, even if it takes longer. It's the great employees that will help your company get to the next level.

Just like you create buyer personas for your customers, create candidate personas for your job candidates. Your personas should be different for each role you’re hiring for but will share some underlying traits around company culture.

Next, take ownership of attracting candidates to your company's brand and make them interested in learning more. This will help you build a recruiting pipeline that will give hiring the same predictability as sales. Then, turn those leads into applicants.

Employer brand also plays a significant and critical role in hiring and attracting top talent. Well-regarded brands can bring down training expenses by as much as 50%, and 50% of employers and businesses with strong employer brand report more qualified applicants. This helps potential candidates feel excited about the possibility of working for a brand with an established presence, and the employees that you do have will feel proud of the work that they’re doing and proud to represent your business. 

Focusing on branding to help you attract top talent will pay off, as strong branding is associated with a 28% reduction in organizational turnover.

7. Managing Workflow

Once you have the people to make the magic happen, the next challenge is managing workflow. You want to ensure that your team has the processes and tools to do good work and do it efficiently. 

At the same time, you can't be everywhere at once as a business leader. So how do you focus on the business while ensuring that everyone working in the business has what they need? This is why a common challenge for small businesses is effectively managing workflow, especially as your business scales. The good news is that, when done right, it does pay off: marketing automation can bring more than 400% revenue increment.

How to Fix It:

The best way to diagnose the roadblocks your team faces and increase efficiency is by creating ways for them to provide feedback. You can do this through: 

• Employee satisfaction surveys
• Frequent one-on-one meetings with direct reports
• Ensuring your direct reports implement one-on-one meetings with their direct reports
• Occasional skip-level meetings
• Asking about threats to the business and the issues that give them the most "pain" in their roles
• Finding the commonalities in the feedback you receive and the bottlenecks

Understanding how your employees feel and any roadblocks they may face will help you identify areas that would benefit from automation. As mentioned above, implementing time-saving strategies can be a significant benefit to improving performance and achieving overall business success.

8. Financial Planning

More resources increase ability, efficiency, and quality. Unfortunately, access to many of these resources comes through having capital, but small businesses reported that a lack of capital or cash flow was their number one challenge. 

In addition, small business loan approval at big banks is significantly low - 13.5% as of March 2021. Given this, financial planning with limited resources and a budget can be complex for small businesses.

How to Fix It: 

Every business will be different, but you'll want to use business credit wisely, cut costs where possible, and manage cash flow by staying on top of invoices and bookkeeping. Business accountants and financial advisors can help you analyze your financial situation and help you make good decisions.

9. Scaling

"There's this mix of building scalability early, versus doing what you have to do to get it all done," according to Nick Rellas, co-founder and CEO of Drizly.

This is a tricky one, especially since every situation is different. You'll see this problem arise in all areas of business: in product development, in marketing and content creation, in hiring, and so on.

For example, many business executives will push growth at all costs. But if you grow your company too quickly, you'll find yourself having to hire quickly, which directly feeds into the small business challenge of finding and hiring top-quality talent. 

In addition, you may land a large client that makes you feel hopeful for the future, but it then becomes difficult to keep up with their needs. Because of this, a small business challenge is being able to scale and managing the side effects that come with scaling. 

How to Fix It:

Unfortunately, there's no perfect answer here. "Depending on where you are in your business' lifecycle," says Rellas, "the scale will tip one way or the other, but I do think you need both at different times."

What it comes down to is not obsessing over every detail but the right details. Closely monitoring product perfection, for example, might not be as important as doing so over customer service. It's better to put your fears aside and launch a product that isn't perfect because you can always update and improve it. After all, once your products are in the hands of your customers, you can learn much more quickly what's working and what isn't.

Obsessing over customer service, however, is worth the extra effort. Amazon CEO Jeff Bezos puts it well in his 2016 letter to shareholders: "There are many ways to center a business. You can be competitor-focused, you can be product-focused, you can be technology-focused, you can be business model-focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality."

("Day 1" is what he refers to as a period of growth and innovation, whereas "Day 2" is stasis, irrelevance, and slow demise.)

While these are just a few of the many business challenges facing small businesses every day, there are many others out there. Many of them can be planned for and mitigated with the proper planning and strategy.

Editor's note: This post was originally published in July 2018 and has been updated for comprehensiveness.