Top 7 Challenges Facing Small and Medium Sized Businesses

Are you looking at starting a business soon? Small and medium-sized businesses form the backbone of economic growth and development in any country. However, they face a lot of challenges that threaten their growth and operations. And some challenges have forced some businesses to close.

So, whether you are starting a small or medium-sized business, you need to be aware of the challenges that you may encounter in the future and see how you can plan towards managing them. Because of the truth, there are some challenges that you will experience as a small business owner.

So, without much ado, here are 7 common challenges or problems faced by small and medium-sized businesses that you should be aware of.

Challenges Facing Small and Medium Sized Businesses

  1. Political Changes

Yes, a change in government policy can affect your business. A new policy can be forced by a new government about the operation of businesses in the state or country and this can affect business operations. This can be an increment in taxes, levies, electricity, petrol, etc.

Small and medium-sized businesses are challenged by the fact that they have no control over costs driven by government mandates, and as a result, they are forced to operate on a tight profit margin.

Increasing the prices of goods or services end up putting a lot of pressure on customers, which affects turnover in the end.

  1. Poor Access to Funds

This is another big challenge facing small and medium-sized businesses. Most SMEs don’t have access to funds or capital to run or scale their business. And most financing companies don’t give loans to start-ups.

Aside from that, some existing small businesses don’t have the required collateral or proper business records to qualify for loans. Some SMEs don’t have a proper business structure, and this is why banks and investors find it difficult to evaluate the creditworthiness of their business to support them with the loans required.

Even when they are being given access to funds, the high-interest rate is another challenge for most SMEs.

  1. Hiring Employees

Many businesses are facing this challenge to date. Many SMEs have failed due to the incompetence of their staff to manage the business or responsibility being handed over to them. Finding the right people to work with is one of the biggest challenges many SMEs face.

As many people have the wrong attitude towards work, it is sometimes hard to find people who are willing to learn while working.

A business can easily navigate through hard times with the right people and still come out stronger. To navigate through this challenge, businesses hire the service of HR (Human Resource) professionals for their staffing needs.

  1. Poor Management

Although there is no qualification to be an owner of an SME, poor management and leadership skills can be a detriment to any business. Some business owners lack training in the aspect of leadership, how to run a business, managing people and resources.

Poor management alone can lead to the closure of any business. Business owners can either be equipped with good management skills and habits or hire people who are good in these areas to run a successful business.

It is a popular belief that some people are born leaders. But this is false. There are a lot of books on leadership and business management that business owners can read and be equipped in areas that are needed to run a successful business.

  1. Marketing

No matter how good your products or services are, if the majority of your target audience doesn’t know about your business, you will surely experience poor sales. Reaching your target audience is the key to getting sales and generating revenue for any business.

In today’s crowded marketplace, it is quite challenging to gain a competitive edge. Most SMEs either lack the funds to create awareness for their brands to reach the majority of their target audience or don’t even know how to go about it.

Small business owners still rely on billboards, newspapers, radio, and television broadcasts without investing in digital platforms. And as a result of this, they are experiencing poor sales, low revenue, and stunted growth.

Combining offline and online marketing strategies is the way to create visibility and brand awareness in this present-day business marketplace.

  1. Balancing Growth and Measuring Performance

It was once quoted by Peter Drucker, “what gets measured, gets done”. The ability to identify the key metrics by which small and medium-sized businesses can use as an indicator to measure their success is among the challenges facing SMEs.

Most business owners have no system in place to measure the performance of their business. They can’t tell when it is time to scale and how to balance growth for their business.

Finding a balance to this can be a challenge and one that takes trial and error. It is up to the business owner to find a balance between how to measure growth and quality. This is very critical for scaling any business.

  1. Business Experience

A lot of SME owners venture into businesses they have no knowledge or experience in. As a result, they conduct business without structure and without adhering to industry best practices.

Many jump into business without conducting any research because they saw other businesses thriving and think if they launch theirs, they will get the same result. No knowledge of the chain of distribution of the business, government policy regarding the business, or experience in basic business management skills.

Having knowledge and experience in whatever business you want to venture into gives you an edge in a highly competitive environment.


As the leader of your business, you must be alert to all these challenges at your planning stage. There are many challenges small and medium-sized businesses face, and going into a business as a would-be entrepreneur without considering these challenges would be the greatest mistake you will make.

Even though we have covered some of the most common challenges faced by SMEs, there are still others that you might face on the journey of growing a successful business. Your response to these challenges is what will change the game towards becoming successful and leaving your competitors behind.

People do overcome these challenges – they are just challenges.

Francis Nwokike

Francis Nwokike is a Social Entrepreneur and an experienced Disaster Manager. I love discussing new business trends and marketing tips. I share ideas and tips that will help you grow your small and medium business.

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