The Small Business Administration defines small business as any business with fewer than 500 employees. To us, that seems a bit large. Our definition of small business is any business with 100 employees or fewer, a category that includes more than 98 percent of all U.S. businesses. The latest year’s U.S. government figures show that the country is home to 27 million small businesses. Of those, approximately 21 million have no employees. Meanwhile, hundreds of thousands of new businesses open their doors each year. This kind of growth is an indicator of the appeal of owning a small business.
Even though small businesses collectively generate $5 trillion in sales in the U.S., the biggest challenge of an individual small business is survival. 80% of all new business start-ups are out of business within five years. And if that doesn’t get your attention, 80% of the 20% that survive the first five years don’t survive the second five! That means, on the average, 960 out of 1,000 businesses that start this year will not be around in 10 years. This is proof that you’re in an elite group if you’ve just survived, let alone thrived! What makes it so hard?
Running a small business can be chaotic. It’s a never-ending exercise in problem-solving and it’s easy to get sucked into the day-to-day operations required to keep things running smoothly and profitably. By taking the time to invest in a strategic planning process, you’re saying, “I am ready to take this business to the next stage of success.”
Top Strategic Challenges for Small Business:
1. Financial Issues. Includes finding adequate funding, getting billings out on time, collections, and credit management. In a word, a top problem is CASH.
2. Customer Issues. Includes understanding what the customer really wants, finding enough of the right kind of customers and keeping them happy, so they don’t turn to competitors.
3. Production Issues. Varies by type of business. In general, businesses of all types struggle with being able to give customers what they want, when they want it, at the price they want it, and at the highest quality levels. Doing this predictably and repeatedly is a tremendous challenge.
4. People Issues. Includes finding the right people, keeping them happy, compensating them, motivating them, training them, and getting them to deliver quality work.
5. Limited Resources. Small businesses usually don’t have large cash reserves, dedicated research departments, fully-staffed IT functions, strategic planning functions, etc., to address challenges or opportunities..
6. Growth. Growth brings the challenge of change. It’s one thing to get good at something when you can hone your skills through repetition; it’s a completely different challenge to get good and stay good when the rules of the game keep changing with regard to competition, customer expectations, globalization, people issues, finance, technology, etc.