10 Challenges a Small Business Struggles With (+Solutions)

February 11, 2022 by Hamiid Nouasria, Vinay Karode

Summary: Building small businesses is the new awesome thing. Millennials and Gen Zers are 188% more likely to build their own business. But it’s frustrating to know that 95% of these new businesses fail to survive because of their challenges.


A small business can face all kinds of challenges and struggles in its early stages. De facto, 50% of companies fail in their first year, and 95% fail in their first five! But this is not to discourage you or pull you down. You’ve come to the right place already because we’ll be listing the most significant challenges small businesses struggle with & we’ll suggest practical solutions!

The 10 biggest challenges a small business struggles with, and practical solutions:

1. Finding customers

The struggle to find new customers isn’t restricted to small businesses only. Even Apple and Amazon have a wildly big army of marketers working hard to attract enough customers and remain a top brand!

And this means that the first thing you need to do before forming a small business is to make sure there’s enough market demand for what you’re offering. Doing so reduces the possibility of being one of the 42% of small businesses that fail because of market demand issues.

Once you find your market, it’s time to try to get your share!

You’d have to compete with tens of other small businesses who may have a louder voice than yours at the start. But with persistence and continuously focusing on delighting your customers, you’d start to build your list of long-term loyal customers.

Being customer-obsessed is more crucial than ever before nowadays; we’ll talk in detail about that in just a bit!

2. Generating new leads

An acquired customer is someone, who purchased from a brand, is satisfied with what he got, and is willing to buy more in the future. Acquired customers keep small businesses alive!

And I doubt that you started a small business not to keep it alive. And if that’s the case, you can’t go without integrating lead generation techniques into your marketing strategy.

You may or may not want to take advantage of many marketing strategies and techniques But one thing is for sure: if you want something that you invest in once that keeps generating leads for years, you should consider creating content!

Content can be almost anything; written blogs, images, infographics, podcasts etc. However, if we recommend one content form over the others, it’ll be video content creation because it increases conversions by 80% when added to a landing page!

Other suitable lead generation techniques for small businesses include SEO, SEM, bots, and email marketing.

3. Increasing brand awareness

The science of marketing proves that people buy from brands they’re familiar with and know well. This truth tightens the robe around the neck of new and small businesses slightly because of being unfamiliar to people. However, if you constantly produce optimised and valuable content, you’d undoubtedly find your way to your audiences and get their attention.

Still, reaching them and getting their attention isn’t enough! You have to leave an excellent first impression and start your relationship with your customers right.

In plain English, putting in the work of creating great content is worth it.

4. Keeping up with the Digital transformation

The internet has made it possible for anyone to start a business online. It has made it mandatory for all companies to be online, including small and medium ones that operate in the real world!

Digital transformation is the shift to virtuality and the adoption of technologies. And it doesn’t only mean you need to be present online as well, but also that you should meet the high standards imposed by the digital transformation leaders!

In other words, customers don’t care how small or new your business is; they simply expect you to compete with industry leaders and stand out. And needless to say, a small business will struggle to do so.

A great piece of advice comes from the book “Crush It” by Gary Vaynerchuk. Gary, a branding expert, assures that being original and unique online will certainly pay back in the longer run.

Even when competing with the best, be original, and you’ll eventually be noticed.

5. Focusing too much on “competitor obsession” vs “customer obsession”.

Another challenge small businesses face is to define their obsession approach; will they be product obsessed? Competitor obsessed? Technology obsessed? Etc.

The obsession approach simply means what will the company give the most attention to. For instance, a company that’s product-obsessed will focus on creating and inventing top-notch products for its customers, as Apple does! And a competitor-obsessed company will focus on competing with the best in the industry. Think about Huawei competing with Apple for instance.

While each one has its pros and cons, one thing is for sure: you can’t not be customer-obsessed today!

Customer obsession simply means focusing on doing anything to make customers happy. And this includes providing premium products and services for fair prices, but it also means communicating with customers and making them feel extremely valuable!

6. Managing finances wrongfully and redundant cash flow

Research conducted by American billionaire and investor Bill H. Gross found that funding is the most negligible significant factor in why startups and small businesses fail. He found that funding is responsible only for 14% of startups’ failure rates while plan execution is responsible for 32%!

However, small businesses and startups claim that the number one challenge is capital and cash flow! Even statistics prove that at least 29% of new companies reportedly fail because they lack finance.

Bill responds by explaining that it’s not always cash flow and funding that’s buggy. It’s more likely to be the entire business model, the marketing strategy, the absence of a clear business plan, or it might “actually” be funding and cash flow!

The point is, it’s not always money and cash flow that shakes small businesses’ financial stability. It can be any of the other tens of factors.

While it’s always a bad idea to rush things out, it’s never a bad one to take a step back and see where you might be able to improve. You can even run the extra mile and consult a financial advisor or accountant, and you’ll undoubtedly find ways to minimise redundancy & increase cash flow.

7. Taxes

Taxes cause a lot of frustration for small businesses owners. This problem extends its former cash flow, making it worse. So, when making a financial management plan, keep in mind that small businesses pay an average of 19% tax on their annual revenue.

There could be some deceptive ways to reduce the taxes, of course; however, we certainly don’t recommend jumping to the ring with the IRS!

8. Networking

Networking is vital for small business owners. Attending events and meeting other business people can create connections with people who can help you reduce production expenses & increase your ROI.

But unfortunately, the restrictions imposed by the pandemic had reduced the occurrence of such events massively.

Still, you can constantly interact with people on LinkedIn and attend virtual events! And this will increase your visibility & help you attract quality people from your niche.

9. Hiring talented people

In 2019, 52% of surveyed business owners agreed that the most significant challenge for small businesses was labour quality (CNBC). It’s a significant percentage, especially for small businesses that still can’t attract top-tier employees nor spend thousands of dollars on recruiting agencies.

As we mentioned earlier, a clever trick would be to interact with the LinkedIn community and leave positive influences everywhere! And this long-term investment will certainly help you spot & attract quality people in the future.

Also, don’t go traditional on your urgent hirings! Don’t just post a job offer and hire the next day, no matter how critical the position is! Instead, take time to run a paid test on selected candidates, then onboard the right one. This way, you increase the chances of landing great employees, wasting a little more time now than a lot in the future.

10. Lacking essential awareness of business management principles

Business management issues arise even in the finest firms in the world. Many startups fail, for instance, because the founders do not agree on decisions or because the employees try to do things their “own” way.

Henry Fayol suggested 14 principles of business management to solve and avoid any of these problems. We recommend you do enough research and clarify business management rules for you and your team to sidestep any future conflicts.

Bonus: Scalability

Will your business still generate income if you decide to go on a trip tomorrow? What if you were sick and couldn’t work for a couple of weeks? Would it still generate income without you?

If not, your small business isn’t scaled yet!

Scalability creates an autonomous system where the company can (and do) function by itself without your presence. And that’s what you should work on!

You should create a system where income generation is automated. And this requires foremost having enough content online that attracts enough inbound leads, and it also requires you to outsource almost 100% of your tasks to other people in your firm.

And this certainly needs spending more cash and hiring quality employees (who usually ask for a hefty salary). Yet, this also means a lot of free time to spend with your family and invent more products and services to grow the company!


Seeing all these statistics may make small business owners frustrated and disappointed. However, this was never the goal of this blog post! We encourage you to try your best and take advantage of the knowledge other failing businesses leave behind. Avoid their mistakes, learn from yours, and you’ll eventually overcome the challenges your small business struggles with.

Hamiid Nouasria
Hamiid Nouasria loves researching and writing entrepreneurship, marketing and technology articles. And holds a Bachelor's Degree in English Cultural and Media Studies
Vinay Karode
Vinay Karode loves reading, filming videos, helping brands with strategy. And holds a Masters Degree