The biggest challenges facing small businesses

Owning and running a business is never easy, and owner-managed businesses face many financial, operational and technological challenges. The UK has experienced significant economic instability in recent years, making these challenges all the more problematic for businesses that don’t prepare and adapt.

In this blog, we will run through some of the biggest challenges facing small businesses in 2024, along with some tips on resolving or mitigating them.

Talent Retention

Many sectors in the UK are facing labour shortages in 2024, making it more difficult to recruit and retain the best employees. Recruiting talented people and retaining their services in a competitive job market can become expensive, putting pressure on your cash flow through bigger wages.

Furthermore, the skills gaps created by staff turnover can create operational issues and inefficiencies.

To improve talent retention in a small business, consider one or more of the following strategies:

• Focus on competitive pay and benefits, including creative reward structures and unique perks that cater to your employees’ interests and needs.
• Foster a positive and inclusive work environment where employees feel valued and respected.
• Promote a healthy work/life balance and provide flexible work arrangements.
• Recognise and appreciate hard work and contributions while providing meaningful feedback.
• Communicate clearly with employees about the things that might impact them.
• Invest in strong onboarding programs for new employees.
• Conduct regular employee surveys to identify areas for improvement.

Rising Costs

Compared with a few years ago, the increasing cost of energy, raw materials, and labour is squeezing cash flows nationwide. High inflation has also seen the cost of borrowing increase dramatically as the Bank of England raises interest rates.

Greater costs mean more revenue is needed to balance the books, while a greater borrowing cost can affect current and future fundraising.

Any significant fluctuations in cash flow can lead to financial instability if the right preparations aren’t made.

Tackling rising costs requires strategic planning and an emphasis on business data.

• Cut costs and improve efficiencies where possible, such as reducing waste, streamlining processes and cutting back on areas of less importance.
• Look to increase revenue, whether by raising prices, expanding markets, or diversifying your product or service.
• Seek professional advice, such as an accountant or business consultant, to develop a data-driven strategy to improve your cash flow.

Time Management

Owner-managers must juggle many roles to keep their businesses running smoothly, from finance to customer service and inventory management.

Where larger businesses have the resources and staffing to hire dedicated specialists in all critical areas, owner-managers often don’t. These jobs take time and may be an unwelcome distraction from important things like strategic planning and overseeing operations.

Here are a few ways small business owners can optimise their time.

• Maintain a focus on a smaller number of strategic goals you want to achieve rather than trying to do too many things simultaneously.
• Use time management tools to streamline project management, prioritise tasks and track progress.
• Delegate tasks to employees or outsource non-essential activities to free up your time.
• Utilise productivity apps like time trackers, project management tools, and communication platforms to streamline workflows.

Succession Planning

For owner-managers, a business is a huge part of their life, not just a career. However, they may not wish to run the business forever. That’s why good succession planning is essential, even if there are no immediate plans to sell or retire.

Succession planning can create a lot of different challenges. How do you find the suitable successors? Can you manage and resolve cultural challenges they might bring? These things can become more complicated in a smaller business where there may not be any formal structures or processes in place.

Here are some tips to get you started towards the right succession plan.

• Understand and clearly define your goals, including your financial goals, timeline and aspirations for the business after you leave.
• Address legal, financial and tax aspects.
• Start early: Early planning allows for a smooth transition and minimises disruption.
• Explore the various exit strategies that may be available to you.
• Consult a qualified Corporate Finance accountant to find the most appropriate route for you and your business.
  
  

How can the Shorts team help? At Shorts, our Owner-Managed Business team helps businesses tackle these challenges. Our team will continually seek opportunities to make a real difference to the health and wealth of our clients’ businesses. This includes your accounts and your tax position, business strategy and remuneration planning. You can learn more about our team's work for growing businesses by booking a consultation with our team.