Small businesses play a critical role in the World’s economy. They account for 7 out of 10 jobs created. While the contributions of small and medium-sized institutions to development are generally acknowledged, entrepreneurs in this sector face many obstacles that limit their long-term survival and growth. Here are the four main challenges that affect the performance of small businesses globally.

1. Financial Constraints

The inadequacy of funds is a major setback for small and medium-sized business growth. Financial access is critical for small and medium-sized institutions’ growth and competitiveness. Small businesses usually have difficulties in accessing banking services, and lending conditions discourage most small and medium-sized enterprises from borrowing funds. Lack of short, medium and long-term capital, inadequate access to financial resources, and credit facilities affect the growth of micro and small-scale enterprises.

With financiers like Thinking Capital, small businesses can get easy access to funds that will help them facilitate their growth. It is vital for small businesses to seek alternative sources of funds instead of relying on the banking system, which is more structured and regulated.

2. Inadequacy Of Managerial Skills 

Management and professional experience and expertise is a significant factor in achieving successful performance. Most small and medium-sized entrepreneurs and managers lack both management and professional skills and that lack management and professional competence, which leads to poor performance. Management experience is a significant factor in achieving success or successful performance in the small business environment. Business owners should be proactive about gaining the relevant industry, management, and start-up experience depending on the industry they are operating in, this will be useful to their growth.

Small business owners should encourage their managerial staff to take on short courses on management, accounting, finance, and administration to improve their skills and gain more experience. This would significantly improve their management skills, which will be beneficial to the growth of the businesses. It is also essential for small businesses to embrace competence development opportunities like training and provide incentives that will help their employees improve their skills. 

Giving employees study leaves, giving them study loans, and doing in-house training is one of the ways small businesses can develop the competencies of their staff. Once these skills have been instilled, the company will reap the benefits of excellent performance.

3. Competition

Competition is undoubtedly one of the significant challenges that all businesses face. It is, however, essential to note that small and medium-sized companies are hit harder. This is mainly because they lack the financial and managerial capacity to keep up with competitors and outdo them. Unfair competition is a significant challenge faced by small and medium sized businesses and that competition was a barrier to the growth of small and medium-sized enterprises. 

Additionally, most small and medium enterprises lack competitive advantage due to the inadequacy in strategies and policies regarding unfair competition. Small businesses increasingly face unfair competition not only from their peers but also from large corporations participating in niche markets once regarded as a preserve for small businesses. 

To remain competitive small business owners have to be aggressive in their marketing efforts. Also, they should direct their efforts towards meeting the quality standards that their customers are looking for. Doing a competwwitor analysis of businesses in your niche will also give you insights that can give your business a competitive edge. 

Governments and relevant ministries are also encouraged to generate policies to enhance fair competition among small and medium institutions, as this would increase their growth and more investments in the sector. As the governments and ministries do their parts, small and medium-sized businesses should establish competitive strategies to improve their competitive advantage. This entails developing proper strategic plans, which will guide their activities.

4. Infrastructural Constraints

Infrastructural constraints, and especially in the area of technology, is among the most significant development challenges that small businesses face. As days go by, the number of clients and data businesses handle the increase. Unfortunately, most small businesses lack scalability in technology, and this makes growth challenging for them.

The use of obsolete technology has slowed down growth. To combat this challenge, businesses should look for affordable technology solutions that can help them handle their growing number of clientele. Keeping up with emerging technologies that big corporations use is challenging. However, strategies such as outsourcing is a cost-effective way of keeping up with the dynamism, which plays a significant role in the growth of businesses. 

The importance of small businesses to the global economy cannot be overstated. While that may be the case, these businesses still face challenges, which are barriers to them reaching their full potential, and making even more impact on the economy. If the challenges listed above are effectively combated, then there will be significant growth and development of global SMEs.


Richard is an experienced tech journalist and blogger who is passionate about new and emerging technologies. He provides insightful and engaging content for Connection Cafe and is committed to staying up-to-date on the latest trends and developments.