What are the biggest pain point of small and medium-sized business owners — and how have these pain points changed in recent years, if at all?

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What are the biggest pain point of small and medium-sized business owners — and how have these pain points changed in recent years, if at all?

DEFINITION The definition of small or medium-sized businesses varies by country and by industry. For the purpose of this report, we will be using the definition of small and medium-sized enterprises (SMEs) according to the U.S. Small Business Association. The definition is as follows: An SME is a business that employees anywhere between 1 to 1000 employees. A “small business” may include a business employing up to 500, depending on profits generated and its industry, whereas a “medium” business may be 500 to over 1000 employees, depending on profits generated and its industry. To compile this list of the six biggest pain points SMEs face, we have included sources from Canada and the United Kingdom. Although the SMEs in Canada and the U.K. are defined in much smaller numbers of employees and profits generated than in the U.S. (according to the Industry Canada and the U.K. Department for Business Innovation and Skills) the problems identified also apply to American SMEs. PAIN POINTS FACED BY SMES Although there have been several political and economic changes recently, the general challenges SMEs face have changed very little, as sources from 2014 onward indicate. After analyzing several sources from the past few years, the most commonly cited challenges said to be faced by SMEs were the following: • Cash Management • Government Regulation
• Finding and retaining customers • Hiring new employees • Local economic health • Over-extension Below, we briefly discuss each challenge and some suggestions to overcome the challenge.

Cash Management SMEs have trouble managing cash flows and securing funding. Internal factors to this challenge include clients failing to make payment, unexpected or unnecessary expenses, outstanding bills, and failing to effectively budget. Solutions to this challenge include using apps to keep track of cash flows, online invoicing, or hiring a specialist. There are also external factors to this challenge, which includes rising interest rates—making it difficult for SMEs to gets loans and credit lines. Keeping good accounting records may help SMEs overcome this factor.

Government Regulations Changes in government regulations can have a big impact on SMEs. This is something they have little control over. However, sometimes SMEs are not knowledgeable about government regulations. This includes tax, environment, and advertising regulations. In the U.S., changes to healthcare regulations have also become a concern. To overcome this challenge, SMEs may have to do research about pertinent regulations. They could also hire specialists or use software that helps them identify regulations they need to be in line with.

Finding and Retaining Customers

SMEs sometimes may not clearly understand their customer base or rely on a few clients that generate a lot of profit. This could hinder an SME from finding new customers. In order to diversify and better understand their customer base, SMEs can analyze their current customer base to identify current “best” customers in order to serve a more specific customer base. Social media can be used to better identify the needs of their customers and it is also possible to ask current “best” customers for referrals. Of course, providing excellent customer service and perks are also helpful.

Hiring New Employees SMEs also face the challenge of hiring new, qualified employees, as it may difficult to offer competitive salaries and due to changes in employee healthcare regulations. The process of hiring and training new employees can also be expensive. Additionally, it may be difficult for SMEs to keep employees motivated.

Ways to overcome this challenge include offering perks, such as flexible schedules, and asking for feedback from current employees. Offering health insurance is another way to lure workers. A study found that " more than 75% of employees who say they have good healthcare benefits also report high job satisfaction." A lot of small businesses think that offering health insurance can be too costly, however, "small businesses with fewer than 25 employees may be eligible for a tax credit for purchasing health insurance for their employees." Also, businesses do not have to contribute to their employees’ health insurance, instead, they can offer them the opportunity to "take advantage of their group purchasing power to obtain better rates through the business."

Another way to overcome this challenge is to hire an apprentice. An article from The Telegraph states, that in the UK, "The national minimum wage for an apprentice is £3.40, but data also shows that 74pc of small firms that employ an apprentice see improved business productivity." The use of apprentices in small business has historically been viewed as a way to get cheap labor. Also, research shows other benefits of using apprentices include: "enthusiasm; an ability to mold staff to the business needs and develop skills to future-proof the workforce; and fresh ideas. "

Also in the UK, "the Government has increased its financial support for the employers taking on apprentices." Since May 2017, "a new STEP package will mean that small firms with a wage bill of less than
£3m can claim 90% of their apprentice training costs back, or 100% if the apprentice is 16 to18-years-old."

Another article from Australia shows the value of hiring graduates. The article states that "students are now graduating with more experience than previously, it means that the cost of hiring someone straight out of university is getting lower." The article explains that since these new graduates have some experience, the cost of hiring a graduate in an entry-level position cost the business less since the experienced graduate can get to work quicker than training a new worker without experience.
It is suggested that companies can use "student internships to their advantage as a way to ‘try before they buy’. A 12-week internship, for instance, can be seen as an extended job interview where an ongoing position can be offered based on this."

Local Economic Growth Local economic growth, or lack thereof, is another challenge SMEs face but over which they have little control. This also includes rising prices and living wages, which put a strain on small businesses. Some suggestions to help deal with this challenge include expanding beyond the local area or joining the local chamber of commerce and other local business groups.

A paper on globalization and growth discusses how SME's are key players in the economy and the wider eco-system of firms. The paper shows that "in the OECD area, SMEs are the predominant form of enterprise, accounting for approximately
99% of all firms. They provide the main source of employment, accounting for about 70% of jobs on average, and are major contributors to value creation, generating between 50% and 60% of value added on average. In emerging economies, SMEs contribute up to 45% of total employment and 33% of GDP. When taking the contribution of informal businesses into account, SMEs contribute to more than half of employment and GDP in most countries irrespective of income levels. This 24-page report offers a lot of insight into global SME's.

Over-extension A very big challenge for SMEs is doing too much in too little time; in other words, over-extending themselves. Part of this problem may also stem from SMEs confusing quality with growth. In this case, SMEs could neglect the quality of their services or products due to an overwhelming demand. Trying to do too much without adequate resources could lead to fatigue, loss of motivation, passion, and productivity, and may increase mistakes and customer dissatisfaction. To overcome this challenge, SMEs could use more automated systems or apps, outsource, or hire an additional assistant or employee, and make a schedule in order to balance their personal and work lives. CONCLUSION

SMEs face a myriad of challenges that could prevent them from running a successful and smooth business. In recent years, six of the biggest challenges paining SMEs are:

• Cash Management
• Government Regulation
• Finding and retaining customers
• Hiring new employees
• Local economic health
• Over-extension

Most of these challenges can be addressed utilizing new technology and innovations, and staying informed about changes to regulations and current trends.
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