Five Reasons SMBs Don’t Hit Their Growth Projections

Small- to mid-size businesses (SMBs) often don’t meet their growth targets or other financial goals for a variety of reasons. Unfortunately, these challenges can snowball and cause bigger problems down the road. In December 2021, the U.S. Small Business Administration reported that nearly 33% of small businesses shut down within the first two years, and 50% shut down after five years. How can you make sure your business is one of the ones that survive past the five-year mark? By anticipating common challenges faced by SMBs and taking steps to avoid them.

Top Five Challenges for SMBs

These are some of the top five challenges faced by SMBs. For the purposes of this guide, we focused on potential internal management issues or challenges and did not include challenges such as identifying the wrong market or issues with the product(s).

1. Lack of Financial Controls or Financial Planning

Unsurprisingly, the first reason companies fail to reach their growth projections is having improper financial controls or setting unrealistic growth projections. Businesses owners may not have the experience necessary to know how to create or track important financial metrics. Life in an SMB can be hectic, and it may be all-hands-on-deck or employees many wear multiple hats to get everything done. That may work in the short term, but long-term, that type of structure will lead to problems and improper planning.

2. Lack of Cash Flow

Cash flow is the amount of cash left over after paying for operating and capital expenses. Basically, after you pay everything like rent, salaries, and other bills, it’s what’s left over. SMBs often have problems with cash flow for multiple reasons, including:

• Late or partial payments – Clients may not pay on time or may not pay in full.
• Delayed payment posting – There may be a delay between when clients post payments and when you receive them.
• Varied Payment Terms – Companies have different policies for when invoices are submitted or paid, and this can lead to payments being due before the work has been paid for.
• Having an insufficient cash buffer – A cash buffer is money you keep on hand to cover unexpected costs, similar to a personal emergency or rainy day fund.
• Disorganization – A lack of organization can lead to lost productivity, missed payment deadlines, or other problems.
• Rapid Growth – Rapid growth can lead to a big jump in expenses before you see a big jump in revenue.
• Overspending – Spending too much can lead to cash flow problems. The risk of overspending is amplified by issues like disorganization or people wearing too many hates.
• Inventory Problems – A lack of planning around inventory can cause problems. Companies may not order enough inventory and be unable to fulfill orders or they may order too much and be stuck paying storage fees for items they can’t quickly sell.
• Market shits – Unexpected market shifts like the COVID-19 pandemic can lead to cash flow problems as companies use up their cash buffers and struggle to adapt.

3. Ineffective Business Planning

Ineffective or inaccurate business planning can cause SMBs to miss their growth projections or cause other problems. Bad planning can lead to wasted money, lost opportunities, and more. It hinders business growth and increases the risk of bankruptcy or business failure.

4. Marketing Mishaps

Marketing involves more guesswork than many companies like to admit. You try something, and if it works, you keep doing it. If it doesn’t work, you cut your losses and move on. However, some experiments may fail not because they don’t work, but because the businesses didn’t invest enough time or money before moving on to something else. Marketing is an area where companies can waste a lot of money for little return or spend a lot of money to make even more money. It can be difficult for some SMB owners to know how much money to spend or even what marketing strategies to implement. Everyone’s heard of social media marketing, blogging, and paid advertising on Google, but marketing is so much more than that. A lack of knowledge can hinder SMB owners, who may spend on the wrong marketing activities while neglecting ones that could grow their business. Owners may also underestimate the cost of marketing campaigns, which can lead to chronic underinvestment.

5. Poor Websites

A badly designed website can hurt businesses in the short- and long-term. For many customers or potential customers, your website may be their first experience with your company. That’s why it’s so important for companies to have attractive, easy-to-use websites. This is even more important for businesses with eCommerce sites. Eighty-eight percent of online shoppers will not come back after having a bad experience with your website. Creating a good website involves having one with a good design, good photographs and copy, and robust shopping cart functionality.

How to Fix It

So, if you’re a small business owner, how do you fix it? How do you avoid all these common pitfalls and set your business up for success? Implementing the right enterprise resource management (ERP) or business management software is a great place to start. ERP software powers growth by managing backend business processes and increasing efficiency. With an ERP, companies can easily send invoices and track invoices, track financial metrics, and view real-time financial data from across your business. They help companies spot and act on trends or other market opportunities faster. At CertiPro, we’re experts in all things related to Sage ERP, including Sage and eCommerce integrations. Connecting your website and ERP software is one of the best ways to streamline the online ordering process and improve customer service. With an ERP eCommerce integration, returning customers will easily be able to see their full order history and make reorders. They won’t have re-enter their address or payment information. On the business side, orders are automatically processed, which saves time and reduces manual data entry. Please contact us to learn more about what CertiPro can do for your business.