Eight of the biggest challenges preventing small business growth

If your small business journey began well, but you’re concerned that your company isn’t growing as you hoped, don’t panic – you’re not the only entrepreneur to get stuck in a start-up rut.

Business growth can be affected by a number of factors, including some you can control – such as money management – and others you can’t.

Your start-up may face the same growth issues as larger companies, including operating in a declining market or lacking access to suitable funding.

But as a start-up owner, you have the advantage of potentially being able to pivot your business to experience growth.

So, what common challenges can new businesses face – and how can you overcome them?

Lack of strategic vision

Do you have an up-to-date strategy for your start-up?

A business strategy aims to create a long-term plan you can follow to reach your goals.

Your strategy might define your ideal target audience, detail your competitive positioning, state key performance indicators (KPIs), and give financial projections.

Some entrepreneurs may not do enough work to validate their ideas before they are developed – while others may not respond quickly enough to market changes.

However, your business strategy can be adapted according to your clients’ needs.

As the demand for different products and services grows, adjusting your business strategy to encompass new opportunities can help your start-up grow.

Consider setting clear goals, conducting a SWOT analysis (strengths, weaknesses, opportunities, threats), and creating a revised business strategy to ensure your company vision reflects your market.

Poor money management for your start-up

Poor money management can reduce profitability, hinder growth, and potentially threaten the survival of your start-up.

Consistently spending more than your business earns, being financially unprepared for potential issues, and becoming too reliant on outside investments could all prevent your start-up from growing.

Addressing this issue and improving your money management could mean your business can afford to seize new opportunities and operate more efficiently.

Building an emergency fund, finding more effective ways to stick to a realistic budget, and using financial management tools can help you improve your money management skills.

Find out how to give your start-up a financial health check.

Business founder dependency

How would your business run if you were sick and unable to work?

‘Founder dependency’ is when a small business relies too heavily on its founder – this can hinder growth if you are overwhelmed with work or unable to work as much as usual.

Founder dependency also covers activities such as winning new clients, day-to-day operations, or essential skills or experience only the founder has, creating a critical dependency.

It’s natural to want to be involved in every aspect of a business you’ve founded, but letting go of certain responsibilities and looking at efficiency measures could help your start-up grow.

Consider delegating specific tasks to your team and upskilling staff where appropriate.

Establishing more efficient processes and making better use of technology such as artificial intelligence (AI) or business-focused tech packages could help your business run smoothly.

Lack of funding for your start-up

While some areas of your business can be run on a small budget, others, such as research and development (R&D) and staffing, can require significant amounts of money.

If your start-up lacks funding, it could make business growth difficult, as you may not have the money to invest in areas which can promote expansion, such as customer acquisition or paid marketing.

Looking for alternative funding methods, such as crowdfunding, seed funding, or small business grants, could help ease the financial pressure and make further business growth possible.

Read our guide to best business funding alternatives.

Staffing issues for your business

Seeing your team expand can be exciting for a small business owner – it’s visible proof of success.

But if you’re hiring the wrong people or unable to manage your employees well, it could lead to potential problems – a high staff turnover could cause instability and disrupt the flow of your operations.

To solve any staffing issues that could hinder your company’s growth, consider using a more thorough hiring process and investing in employee training so your staff have appropriate skills and feel valued.

Consider management training and what might motivate your employees to encourage company loyalty.

Encouraging regular feedback could also mean you can deal with any issues swiftly.

Read our first-time employer’s guide to hiring staff.

Cash flow issues for start-ups

Cash flow issues can be a significant obstacle to the growth of your start-up.

If you don’t have adequate cash flow, you may be limited in your ability to invest in crucial business areas such as marketing, staffing, and product development.

If your profit margins are too small, cash flow issues could mean your business does not have enough to invest in growth, such as increasing marketing spending.

Establishing a steady cash flow for your business could be crucial for its success and future growth.

Consider creating more effective inventory management processes, improving payment terms, and regularly monitoring your business expenses.

Fatigue and stress for start-up founders

Running a start-up can be exciting and full of new opportunities, but it can also be challenging for many entrepreneurs.

If you don’t take care of your physical and mental health as you grow your business, you may find yourself making less progress, unable to make good decisions, or even suffering from burnout – which could prevent the growth of your start-up.

Take care of your physical health by eating a balanced diet, taking regular breaks, and getting enough sleep.

Also, consider taking practical steps to avoid stress, such as staying organised, improving your work/life balance, and being open about your mental health with your personal support network.

Read our guide on how to care for your mental wellbeing and avoid burnout.

Client dependency

Being dependent on one or very few clients to bring in a large portion of your income can be potentially risky for small businesses.

While loyal customers are vital for growing your start-up, you could be taking on additional financial risk if your client base is not diverse enough.

For example, if one of your clients could not pay for your services, your business could lose a large chunk of income, which would negatively impact operations.

To avoid client dependency and to diversify your customer base, consider actively marketing your business to new customers and offering various products or services.

This way, you could work with several customers and sustain your business, enabling your start-up to grow even if your client base fluctuates.