However, many of the challenges that SMEs face are longer-term though, and have been identified as key in inhibiting both their growth and improvements in their productivity.
Challenge 1 - Securing FinanceSecuring finance can be a problem for SMEs for a variety of reasons. They face a number of uncertainties about whether to seek additional financing, with some of the most common being uncertainty over the future, the desire to avoid incurring additional debt, a fear of rejection, and simply being unsure where to source appropriate finance. With the right information and advice about the financial options available to companies, perhaps these concerns can be mitigated or assuaged, so that SMEs can plan for future growth with confidence.
There are a range of initiatives available through government, industry bodies and other organisations to help businesses overcome these barriers.
Challenge 2 - Evolving with Technological advancesAs the saying goes, "The more things change, the more they stay the same." This is true with SMEs and their approach to technological innovations. As technology evolves at an ever-faster pace, so does the ongoing requirement for SMEs to learn, adapt, and implement new solutions. Whilst many smaller businesses have been slow to adopt new technologies, the reality is that the need for them to be open to adopting new technology and undergo a digital transformation is become ever greater.
Cloud computing has transformed business, allowing users to access all their information from anywhere, any time and on any device. It also allows businesses to scale their operations up or down as per their requirements without incurring huge costs associated with infrastructure maintenance. The ability to access data from anywhere means that employees can work from home or while traveling, thereby increasing productivity, and reducing costs related to office space, utilities etc.
In addition, cloud computing also reduces the cost of doing business, streamline their services and capital requirements by allowing users to pay only for what they use instead of buying expensive equipment upfront which may not be always used.
Challenge 3 - Finding New Customers and SuppliersFinding new customers and suppliers for SMEs is an ongoing challenge. Changes in the global economy driven in response to the covid virus has disrupted traditional ways of doing business, creating an environment where SMEs are facing stiff competition from large corporations, who have been able to leverage technology and scale to their advantage.
SMEs have long been considered the backbone of the economy because they create jobs and drive innovation. But these companies face several challenges when it comes to finding new customers and suppliers, the lifeblood of any company.
Part of the problem lies with the fact that most SMEs aren’t well connected with each other or industry experts in their field, making it difficult for them to source opportunities and to know if and when they should take them.
Challenge 4 - The Digital Skills ShortageThe digital transformation of business is a trend that will only get stronger in the coming years, so businesses need to be ready.
Digital skills have become an essential component of the skills that any company needs. According to a report by the consultancy EY, 27% of companies say that the majority of their workers require advanced digital skills.
According to the Lloyds Bank UK Digital Index 2021, an estimated 55% of UK businesses have all six the digital skills that are deemed essential. There is no doubt that smaller companies, especially outside London, are finding it increasingly difficult to find new staff with the right mix of digital skills.
Challenge 5 - ExportingThe UK is one of the most globalised economies in the world and SMEs are well placed to benefit from this. Yet, many small businesses struggle with exporting their goods or services abroad due to a lack of knowledge about how to do it successfully. According to Barclays, of those companies who currently don’t export, 29% have never had the benefits of exporting explained to them.
Even if you want to trade internationally, getting started can be difficult. You need to understand local laws and regulations as well as pricing structures and tax implications – all while dealing with the complexities of foreign languages and cultures.
As the cost of doing business continues to fall, it is vital that SMEs continue to seek support and advice about how best to overcome the challenges they face. This will allow them to focus on their strengths and will allow them to take maximum advantage of the opportunities available.