The Challenges of a Small Business

Small businesses are a key part of the economy. They employ millions of professionals in dozens of industries. They drive local economies and provide critical services to their communities. They also make up the majority of businesses in most countries. But starting a business is no walk in the park and succeeding is even harder. In fact, 20% of new companies don’t survive their first year. During times like the COVID-19 pandemic, it’s even more challenging for small businesses to thrive and stay open.

To be considered a small business, companies must have fewer than 500 employees and generate less than $10 million in annual revenue. However, defining “small business” is not always straightforward, and different regions have their own definitions. For example, in the United States, companies that earn more than $20 million a year could still be considered small businesses based on their industry.

The nature of problems and growth in small businesses seem to be as varied as their owners. But on closer look, a framework emerges that increases our understanding of the nature and characteristics of businesses ranging from a corner dry cleaning establishment with two or three minimum-wage workers to a $20 million-a-year computer software company growing at 40% annually.

A common characteristic of most small businesses is their reliance on the owner’s ability to sell, produce, invent, or deliver the goods or services that give them life. This factor is highly correlated with the size of the business, and it is the key driver for growth. It also places greater emphasis on strategic planning and budgeting, since there is often little if any room for error in a small business.

Another important factor is the ability to retain customers. This requires small businesses to spend more time serving current clients than attracting new ones. It can be done through a number of means, including providing excellent service, offering discounts, or simply keeping in touch. Small businesses that prioritize this aspect tend to have better customer retention than their competitors.

Finally, small business owners must be able to adapt quickly to shifts in the global economy and economic conditions. They must also be prepared to adjust their products and services to meet shifting consumer demands. And they must do all of this during a time when many consumers are reducing their spending. These challenges will not go away any time soon, but they can be overcome by a strong determination and focus on long-term goals. By doing so, they can build a business that will be around for the long haul.