9 top small and medium business risks, and how to avoid them

1. Losing sight of the competition as your customers see it

Most potential customers research your business online, against your competitors, before they ever contact you. Rapid change in products, technology, channels, services, processes and business models can make your business less attractive without you knowing. The usual response is to step up marketing to create more leads, which has little effect because the underlying inhibitors are still there.

For most businesses the website is the shop window, so it is relatively easy to see how you compare from your customer’s perspective. Small things make a large difference, so it is worth looking with your eyes open.

Consider more than the traditional six Ps of marketing: product, price, place, promotion, people and process. Look at the business model too. Differentiation is increasingly achieved by changing how a company does business rather than by competing on the six Ps alone, and new models appear constantly, whether at the scale of Uber and Airbnb or an SME digitising its own processes with a web application.

Pragmatic action: put one hour a month in the diary to monitor what your competition is doing, and do it from the customer’s journey. How will they discover you, explore, evaluate and buy? How does your journey compare? Look at the six Ps and the business model, identify improvements, prioritise them and implement the top ones.

2. Missing a changing market and fast-moving technology

Technology advances are disrupting market after market: voice interfaces replacing browsers for some searches, home automation, autonomous vehicles, connected devices, distributed ledgers for storing and authenticating data. Each of these enables new ways of working, and while the headline examples are large businesses, the same changes reach SME business models eventually.

Change is also an opportunity for anyone paying enough attention to take advantage of it.

Pragmatic action: schedule one hour a month to research the trends and changes in your industry. Watch what is being demonstrated at trade shows and subscribe to a couple of respected trade publications. Use what you learn to adapt your own model.

3. Pointing limited resources at the wrong things

Resource-constrained businesses need the habit of working smart rather than hard. Are you doing many things and being busy with indiscriminate activity, or doing the things that are genuinely a priority and add long-term value? Plan, focus on priorities, and put agile processes behind them.

Pragmatic action: write a concise business and marketing plan. Know your priorities and focus on them. The plan defines what success looks like before you start and details what you will do to get there. Once you know that, choose the marketing strategies that will achieve those objectives.

4. Marketing messages that miss the audience

Ask someone independent of your business to look at your website and tell you what your value proposition is, what your key selling points are, and why a customer should buy from you rather than a competitor. The answer is usually instructive.

Your messages need to align with the needs and issues of your customers, described from their perspective rather than yours.

Pragmatic action: schedule two hours to work on customer-centric messaging. Repeat this six-step model for each primary decision-maker:

• Identify a target primary decision-maker.
• Detail their main business objectives, and the issues they must resolve to achieve them.
• Detail the top five challenges they face in resolving those issues, and what they will want assurance on before buying.
• Detail the value your company offers in resolving those problems, ideally value the competition cannot claim.
• Detail the solution you offer.
• Detail the proof points that give a customer confidence that what you say is demonstrably true.

Once the messaging is captured, make sure every marketing asset says it.

5. Jumping straight to tactics

Do you really need to be doing the things you are doing? We are frequently contacted by businesses that have been advised to do something with no clear link to a prioritised business objective. A common example: they have been told they need a new website because the current one is not optimised for search, and an SEO programme to generate leads. Months and thousands of pounds later there are no leads, and they still cannot find themselves in search results.

Spending on the right things brings results. Spending on the wrong things destroys value.

Pragmatic action: before choosing any tactic, consider the options against each other, decide what result you expect, and start from the objective you are trying to achieve, because that is what lets you prioritise spend. If you do not know, research what others are doing, or get help.

6. Not evolving into modern digital marketing

Many businesses miss a significant opportunity because they have not adopted the modern digital practices that would achieve their objectives more productively and at lower cost. That is understandable: a leader focused on delivering their own products and services rarely has time to become a marketing expert too.

A simple comparison is the leaflet drop. The modern equivalent of putting leaflets through doors is placing content into the feeds of the people you want to reach, and it can be done in a fraction of the time. The real benefit is transparency. Digital gives you immediate feedback on whether the message is landing, so you can change it quickly when it is not.

Pragmatic action: try one new approach over the next month. Schedule two hours and plan something appropriate to your objectives, whether that is a promoted social post or an automated email sequence. If you are unsure how, there is no shortage of free tutorials covering exactly that.

7. Never testing or tweaking

Marketing requires testing and constant modification to produce its best results. What works for one business will not necessarily work for another. Every tactic has value for the right objective, or it would not exist.

Pragmatic action: test frequently and fail fast. If something is not working, change it. If you do not have the time or the resource, get help. Doing the wrong things in the wrong way is the quickest route to wasted resource.

8. Losing sight of profitability

According to Small Business Trends, cited here when this article was first published in 2018, only 40% of small and medium businesses were profitable, 30% broke even, and 30% were losing money. Know your profitability and watch it closely. Winning business at any cost leads to projects that consume money rather than make it, and it is profit that funds growth.

Pragmatic action: use straightforward project and time tracking tools so you know how much time a project is really absorbing. Combined with your other cost of sale items, that tells you the margin you are actually making.

9. Struggling with cash flow

According to research by Zurich Insurance, cited here in 2018, two-thirds of SMEs said they knew of businesses that had been forced to close because of cash flow problems, and two in five said late payments had caused serious problems with their own cash flow.

Pragmatic action: the practical defences are well established. Credit check new customers, be explicit about payment terms before you start, invoice promptly and tell the customer when you have, chase early rather than politely, and escalate late payment through an agreed route rather than hoping.

Sources

• Small Business Trends: profitability of small and medium businesses, cited when this article was first published in 2018
• Zurich Insurance: research on SME cash flow and late payment, cited when this article was first published in 2018