There are a number of challenges associated with owning a small business, from constant demands on the owner’s time to never-ending budget constraints. There are, however, commonalities in the obstacles faced by small businesses. Understanding the expected challenges can shorten the learning curve in business management and operation.
Three big challenges for small businesses are healthcare costs, employee recruitment and retention, and attracting new customers. All three areas can be a tremendous burden on as time and budget.
Many small and medium sized businesses can’t offer group health insurance coverage due to rising costs and restrictive minimum contribution and participation requirements. It’s these primary reasons that 46% of all small and medium businesses (with fewer than 200 employees) don’t offer group health insurance. That’s over 2.7 million employers. The smaller your business, the less likely you are to offer health insurance. In fact, 56% of all micro employers (with fewer than 10 employees) don’t offer health insurance.
However, following the passage of the Affordable Care Act, individuals now have an unprecedented number of options for health insurance that all meet a minimum standard of quality and coverage.
Employees of small businesses can now get health insurance through their employer’s group plan, or get reimbursed by their employer for the cost of their individual plans. These new options mean that employers can provide their employees with high quality health insurance while controlling the cost of the benefit.
See our section on health insurance options for more information on alternatives in plan design.
Recruiting and retaining top employees is another major concern facing small and growing businesses. With the preferences of the workforce becoming more diverse and dynamic, employers need a more personalized approach to attract and retain key employees.
A common challenge for small businesses when hiring is deciding between offering higher wages for more competitive prospects or lower wages for a lower, but more secure, skill set. Small businesses shouldn’t feel like they are at a disadvantage when recruiting new employees.
Small businesses can competitively recruit employees by using employee referrals, adding a career site to their webpage, advertising on online job boards, recruiting interns, and using social media to recruit employees. An outstanding retention program can also give an edge to small businesses looking to hire. Employee retention strategies include creating a high-feedback environment, customizing benefits strategically, and boosting employee morale.
Finding new customers presents more of a challenge to small businesses because they generally do not have the astronomical budgets that larger companies do. This can present a challenge when trying to compete with larger company’s advertising and marketing strategies.
There exist a number of strategies for small businesses to attract new customers include online marketing, search engine optimization, email marketing, and social media outreach. It is vital for small businesses to have a solid understanding of what customers really want and educate customers on everything their small business has to offer.