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Problems That Small
Businesses Face

Determining the size of the firm
falls below certain criteria (that differs from country to country) in terms of
annual return, number of employees, total asset value, etc. Small businesses
have been considered the mainstay in countries around the world. In many
European countries for example, the small business has been considered crucial
to the success and prosperity of the country in general. Most individuals start
a small business hoping to achieve independent profits and personal success.
Small businesses can prove extremely successful when planned properly. Studies
indicate that many small businesses, close or fail within the first few years
of operation. Some of the problems that face small businesses and causing
failure are management problems, financial problems, and employee’s needs.

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The first problem that faces new
businesses is the managerial problems, and one of the managerial problems is
the inability to control expenses. According to Adams (2017), it is easy for
companies with full cabinets to spend the money. But it should have a sense of
control over company expenses. What Adams meant by this was, any company that
wants success and growth must have a good management of expenses. For example,
Ford Motor company faced bankruptcy in a year of years but the company was able
to overcome it and return to the global market because they followed some steps
that helped them on managing their expenses such as back to the business plan, train
their employees and involve them, and talk to the customers. Any company that
face this kind of problems must take Ford Motor company as a model. Basically, as a new company, they need to have an effective
leadership and strategy.

With this in mind, there is a clear
need for effective leadership and strategy to make any company grow in today’s
market. In the opposite, there are many companies that fail due to lack of
leadership and strategy. Adams (2017) noted that without real experience, most
of the new companies that enter the market are struggling with the huge demands
on them, because they have lack strategic and effective leadership. Adams’s
point was valid, effective leadership in any company has a positive impact on
it. For example, Amazon is now one of the largest electronic stores in
the world, but this did not come from a vacuum, there were many factors that contributed
to this, including the leadership. Amazon has many
leaders and each leader has skills and these skills are important to be an
effective leader. As an example of these skills, be clear about expectations,
have the ability to motivate others, be always positive, and also be creative.
And one of their strategies that they follow is not to give up any information
unless absolutely necessary. New
entrepreneurs should have a good management to reach their goal in the future.

The second problem that faces new
businesses is financial problems, and this type of problems is an obstacle to
many companies not only small but also big companies. One of the most important
financial problems is the cash flow. Charles (2017) mentioned that every small
business owner must know where the money comes from and where it is going, to
avoid cash flow problems. Charles’s point was true, cash flow has a positive
and a negative impact on the company, and when it is negative it becomes a
problem, and that’s mean that the business spends more money than it earns, and
the business owner should study it properly to avoid its problem. many companies
around the world have sometimes cash flow problem and that is because of many
reasons. For instance, bad inventory planning, over-investing, low sales, and
lack of financial resources. Svensson (2010) stated that lack of financial
resources is one of the biggest problems during the research and development
phase. However, to turn the negative cash flow into positive the company should
reorganization, create a new strategy to increase revenue and sales, and find
new financial resources. Nowadays, every new company that wants to enter the
market takes loans to be able to compete.

there are many banks that gladly help the new businesses. Ramdev (2016) reported that banks are willing to loan money to
small businesses, but it has many risks. and the business owner must take into
account loans need to be paid even if the business fails. Ramdev’s point was logical, entrepreneurs must be prudent with debt
so that they do not face its problems. There are many
companies that have announced bankruptcy due to the accumulation of debt. For
example, Toys “R” Us the biggest children’s toys company with debt
exceeded $1 billion dollars, also British home stores with debts of $1.3
billion, but all the stores will stay open
for now. New entrepreneurs should control their company money where it goes and
comes, and also they should take care of debts so that it does not accumulate
on them.

The third problem that faces new
businesses is the needs of the workers. The employee
needs a lot of things to work efficiently, and one of these things is the health
care. Charles (2017) pointed out that employee health
care is one of the toughest challenges that face small business owners.
Charles’s point was reasonable, companies must
pay attention to the health of their employees because employees are the ones
who make companies grow. Owners of different types of small businesses agree
that the cost of health care is their biggest problem. For example, health
insurance for a family cost around $16000 and about $5000 for individual.
As a result, many small firms can’t afford to offer health coverage,
and many of those who do offer health care are worried about the
price rising. Moreover, the employee also needs to
have a good relationship with managers.

Another important thing needed by an
employee is the relationship with managers. Adams (2017) mentioned that many
companies fail because they forget their employees. When problems begin between
executives and employees, a downturn occurs at the company level. Adams’s opinion is respectable, the relationship between employees
and the company is critical to long-term success. A good relationship between the employee and managers leads to less
conflict and higher morale, increased productivity, more confidence, and loyalty.
On the other hand, a bad relationship may lead to confusion, stress, more
conflicts, and low efficiency and productivity. Which
cause the end of any company. companies should care about their employees, and
build a good relationship with them because with the managers and the employees
they can achieve more.

To conclude, there are many problems that face
small businesses. The managerial and financial problems. In addition to employee’s
needs, are the main problems that face small businesses

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