Small businesses, especially in New Zealand, form the backbone of an economy and help to create jobs, provide products and services, fuel market growth and drive innovation.

Nevertheless, small businesses are also subject to numerous challenges that can impede or, in worst cases, prevent success. Whether it’s limited resources or competitive market conditions, the various hurdles can be difficult for entrepreneurs and small business owners to overcome. 

Understanding both the availability and benefit of different tools in overcoming these challenges is crucial for small businesses’ survival and growth. As the world increasingly changes, due to technology, culture and other factors, it is even more critical that business owners strengthen their companies to ensure successful navigation through the challenges ahead.

1. Overcoming cash flow challenges

Cash flow problems are one of the most challenging aspects of running a business of any size. However, for small businesses, the impact of stalled client payments, unexpected expenditure and ongoing increases in operational costs can cause a lot more than a simple headache.

Fortunately, there are various financial tools and facilities that can help businesses overcome gaps or disruptions in their cash flow. 

Invoice Finance

Invoice Finance provides a solution for businesses who have funds tied up in unpaid invoices. Instead of having to wait for the term of the invoice to pass–if not longer!–this financial facility allows a business to access the money owed to them tomorrow today.

The injection of funds allows for greater cash flow management, can help cover necessary expenses and ensure a capacity to invest in growth opportunities or pivot operationally depending on market conditions.

Trade Finance

Trade Finance is another financial solution for small businesses engaged in international trade. Importing and exporting across borders can be challenging, especially when you are first establishing your business and partnerships.

Trade Finance tools, such as letters of credit, provide solutions to help mitigate the risks associated with international trade and facilitate reliable, smoother transactions. With the right financial support, small businesses can expand their reach, create strong partnerships abroad and capitalise on global opportunities to further secure their ongoing cash flow needs.

2. Overcoming business stagnation challenges

Being a small business owner is tough. In many cases you are required to work longer and longer hours and be involved in every aspect of running a business. Especially during times of limited resources, this can result in disorganisation, inefficiencies and even just general stagnation. 

There are a variety of managerial and strategic tips for helping a small business maintain an innovative and forward-thinking culture, such as delegation and specialist recruitment, but for those businesses who are especially constricted in terms of working capital, operational and financial management solutions are a critical tool.

These programs and software allow for the automation of simple functions, the streamlining of customer service and the  increased efficiency of financial management. By investing in and implementing the right management programs and tools you’ll free yourself up, in terms of time and energy, to focus on the aspects of your business that really matter: Ongoing growth!

3. Overcoming lack of market demand challenges

Small businesses are subject to greater risk when market demand changes. The fall in demand for your products or services, often caused by factors over which you have no control, can significantly impact your company.

There are a few ways of navigating through this particular challenge. The first is by conducting research into your customer base and analysing the data. This will help you identify the characteristics of your most valuable customers, notice trends in sales and demand, and make informed decisions about how to best utilise your scarce resources for maximum return on investment. Soliciting feedback and encouraging word-of-mouth referrals will help you utilise your existing customer base to expand towards new customers as well.

As far as attracting new customers: While many small businesses invest in marketing and advertising campaigns to further their market penetration and brand recognition, a critical tool for overcoming this challenge is diversification. Being on top of market trends and changes in your target market’s sentiment will help you drive innovation and diversification in the products/services you offer. The greater the diversification, the more agile your business will be in responding to market challenges.

4. Overcoming human resources challenges

Small businesses face a variety of human resources related challenges. Ensuring your employees are motivated and engaged requires ongoing investment in training and development, morale and culture initiatives and a strong understanding of what’s important to your team.

Fostering open lines of communication and connection, which modern day technology has made easy and affordable, is critical for ensuring that your team is operating as efficiently and effectively as possible.

When the labour market is tight, a small business might find themselves facing the challenge of finding the right quantity or quality of employees in the first place. Recruitment agencies, strong business networks and increasingly efficient operations are all ways in which smaller companies can help to reduce the likelihood of insufficient labour supply negatively impacting their success and growth.

5. Overcoming business expenditure challenges

Operational expenditure is one of the biggest challenges facing small business. Excessive overhead costs, payroll and inventory/production costs are all drivers of much of the financial pressures small companies face.

While Invoice Finance, as outlined above can be a great solution for gaps in cash flow, and Trade Finance can help businesses establish strong trade relationships, long term and continuous business expenditure requires additional solutions. 

Streamlining your operations is critical here. Ensuring that you’re utilising resources to maximise productivity and output will help you increase revenue and ultimately profit. Whether this requires investment in additional assets to facilitate better operations, strategic decisions about which products/services to focus on supplying, or investing in automated software that can help smooth out operational tasks, there are numerous ways for businesses to bring costs down and productivity up.

ScotPac – providing the fuel for your clients’ success

Here at ScotPac, our lending specialists offer a wide range of business and commercial finance solutions. We tailor our facilities to suit the needs and objectives of our clients to ensure they have the funding required to invest in any or all of the tools above and overcome their small business challenge.

To find out more about what a partnership with ScotPac looks like, contact your nearest office today.