Starting and running a small business in 2024 comes with numerous challenges. While the economy continues recovering from the pandemic, many issues pose hurdles for entrepreneurs and small business owners trying to survive and grow. Being aware of the most pressing small business challenges can help leaders strategize, adapt, and overcome obstacles on the road to success.
What are the Biggest Challenges for a New Entrepreneur?
Launching a new business venture comes with inherent difficulties. Some key challenges faced by first-time entrepreneurs include:
Knowing Where to Start
There are many individuals who have a great business idea and want to put it into action, but don’t know where to start. Lucky for you, we have a brief guide that walks you through how to develop a business plan, set up a bank account, avoiding copyright infringements, and more!
Building a Customer Base
Attracting enough customers is crucial for generating revenue but extremely difficult when starting out. Entrepreneurs need comprehensive marketing strategies, competitive differentiation in their offerings, and immense patience to build a customer base from scratch. This process can take months or years.
Limited Cash Flow
Most new small businesses start with minimal operating capital and reserves. Carefully managing cash flow is vital, especially covering initial inventory, equipment, employee, and operations costs before revenue begins flowing in. Even minor slow periods or unforeseen costs can quickly lead to a financial crisis without ample rainy day funds. Even established companies run into this issue, take WeWork, for example.
Finding the Right People
Hiring skilled, reliable team members is a huge early challenge. Costly hiring mistakes that bring on the wrong people can single-handedly sink progress. Thoroughly screening candidates and finding affordable top talent takes time that cash-strapped entrepreneurs may not have.
Lack of Credibility
Unknown startups and small businesses must prove their credibility regarding product/service quality, overall business operations, and ability to fulfill promises to customers. Convincing early adopters to take a risk on a new company is very challenging without an established reputation.
Getting Financing
Most startups and small businesses lack extensive assets for use as collateral, established revenue streams, and long credit histories to get traditional small business financing. Convincing lenders to take a risk on lending to an unproven business with no track record is very difficult. Many entrepreneurs have no choice but to self-fund for over a year before qualifying for loans or lines of credit.
Financial Literacy
As a small business, it is absolutely vital to know how much money you have coming in and how much you have going out at all times. At JBS Corp, we highly recommend that all startups and small businesses use accounting software like Xero. This software has an exceptionally user-friendly interface and helps business owners clearly understand how their business is doing financially.
Not only that, but using small business accounting software makes tax time much easier! No more frantic gathering of receipts and paper ledgers.
What are the Biggest Challenges for Small Business Today?
In 2024, small businesses are facing a number of challenges from external factors.
Relatively High Inflation
As of mid-February 2024, the consumer price index (CPI) is just over 3. In 2023, CPI dropped from 6.3 to about 3.3. The year prior, 2022, saw a high CPI of nearly 8.989. The last time the CPI was that high was December 1981!
With this data, we can see that inflation is on the decline, although it is still nearly double what it was in 2019.
Raw material, inventory, and operating costs driven by inflation are hitting businesses’ budgets across industries. Additionally, inflation and consumer spending are inversely related, so the higher inflation is, the less people spend on discretionary items.
Acute Talent Shortage
With low unemployment, hiring and retaining skilled, experienced workers is extraordinarily competitive and expensive. Offering high pay, bonuses, and rich benefits to attract and keep top talent stains budgets for small businesses.
Supply Chain Disruptions
Whether good or bad, external factors impact small businesses, so it is important for entrepreneurs to keep up with the news. One recent example of an issue that may impact businesses is the Panama Canal. At the beginning of the year, the Panama Canal experienced its lowest water level ever recorded at the start of the dry season. With 14% of seaborne US trade coming in and out of the Panama Canal, this is just one example of a current supply chain disruption.
Tightening Venture Capital
With poor market conditions the past few years, all of the startups who were looking for funding will now revisit fundraising in 2024. Knowing this, there will be a lot of competition for funding this year.
How Do Small Businesses Survive Competition?
Facing competition from larger, more established companies is another central small business challenge. These big players have more capital to make quicker, cheaper, and more standardized goods and services. To compete with these big players, it is important to consider the following.
Utilizing Digital Strategies
Digital marketing, selling, and automation enable small companies to act bigger than they are. AI and data analytics help target customers digitally.
Offering Superior Customer Service
Providing exceptional service quality helps small businesses stand out. Customers will pay more and remain loyal for great service.
Specializing in a Niche
Dominating an underserved niche allows small companies to avoid directly competing against big companies. Specialization builds a devoted customer segment.
Networking and Partnerships
Strategic partnerships with aligned companies provide access to new customers and give small businesses an edge.
Final Thoughts on Small Business Challenges
Starting and growing a successful small business in 2024 will undoubtedly be challenging. However, with grit, adaptability, financial prudence, and leveraging technology, small companies can find ways to overcome obstacles. The resilience of small business owners will be tested, but those able to evolve and endure will thrive on the other side of challenges.
