Starting a small business can be one of the most rewarding things you will ever do. But it’s not always easy, which is why it’s essential to understand the challenges that are likely to come your way and how to get around them.
What is a small business in New Zealand?
Most sources state that a small business in New Zealand is defined as having fewer than 20 employees. There is no denying that New Zealand’s economy is built on the backs of small businesses, with as many as 97% of companies in New Zealand being small businesses.
Cutting through the noise and knowing what to pay attention to can be tough. Challenges faced when starting a small business include the threat of strong competition, finding good employees, lack of capital and much more! This article highlights the five most prevalent problems that small companies in NZ confront and overcome.
1. Funding & Financing
One of the most exciting possibilities for small businesses is to grow, whether by opening a second location or starting new initiatives. If you don’t have the finance to fund growth, difficulties can arise; – and you’re not alone in this.
Funding is one of the most difficult challenges faced when starting a small business. Surveys show that the primary issue confronted by small companies in 2021 was a lack of capital/cash flow (23%).
Your business must have enough cash coming in to cover any outflows. Problems can arise when the cost of goods and services are not properly accounted for, meaning you may end up spending more than you budgeted for – It’s essential that financial planning is done well before starting your business (and while running it).
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How to solve it:
First, remember that it’s critical to regularly evaluate your own industry and field. Consider how you might capture and increase your customer base and focus on your customers’ needs. Customer needs will fluctuate based on many factors.
Is it possible for your company to be retooled and revolutionised to face the Coronavirus problems?
While maintaining their core customer experience, many companies may modify how they provide goods to consumers. Restaurants, pet food and toy merchants, for example, are thriving during the epidemic by altering their distribution methods. Customers do not have to come to them; instead, they deliver items directly to customers.
Finally, handle your cash carefully. Only focus on what’s working in your product line to minimise waste. Examine whether you can cut personnel, rent out space, and minimise other spending. Hiring an accountant will help ease the management of cash flow problems within your business and help you track your company’s spending.
Other ways to fund a small business:
- Look into small business grants or funding schemes that may be available for small businesses. You can check for government funding available for small businesses here.
- Attract small business investors or venture capitalists who are willing to invest in your business in return for a share of the profits.
- Finally, you could offer equity in your company to friends and family – this could be an excellent way to attract the right amount of capital.
2. Building a Customer Base
As a small business, you will want to ensure that your brand is well-known and that people understand what you stand for. Building trust with customers takes time, but this can be difficult when running a small business as new customers won’t know the quality of products or services offered. If you’re stressed about building a customer base from scratch, don’t worry, you’re not alone. 49% of company owners state that acquiring customers is the primary objective of their business. It pays to invest in building your customer base.
How to solve it:
Ensure that you have an excellent website and online presence – this is the first place customers will look for information about your company. Being active on social media is also a great way to connect with potential customers.
Surveys from Google found that 84% of Kiwis and 91 % of Australians have engaged with brands through multiple channels, such as in-store, online, and mobile apps. Being present for your customers on various media will not only make yourself visible to them where they want it, but it will give you more opportunities to learn about who your customers are.
Finally, make sure that you target the right people with your marketing – if you’re not reaching your target market, you will struggle to attract a suitable customer base.
Another fantastic tactic for new firms is to provide special discounts and incentives for first-time consumers. It’s an excellent method to overcome the early confidence gap and test your product or service.
3. Not Enough Time
Starting a small business can be demanding due to the time and energy required. Challenges may include not having the funds to start up or not finding employees with the necessary skillsets. Moreover, lack of time management can lead to a lack of morale, missed deadlines and weak productivity.
How to solve it:
There are several ways you can overcome this challenge – for example, by finding an employee to work on a freelance basis or outsourcing some tasks to third party companies.
Finding out what talents you may save time on if you hire someone to perform a task for you will free up your attention to focus on more practical tasks.
Many business owners realise the need for training and development for their employees, but they do not always consider it themselves. Small company owners and executives who continually upgrade their skills and understanding are more likely to have the confidence and ambition to take their business to the next level. They are more likely to embrace adjustments and adapt to new settings, such as learning how to outsource tasks.
Figuring out how to manage your time involves planning and prioritising tasks, setting deadlines and establishing a routine. Think about breaking large projects down into smaller tasks to make them more manageable. It’s crucial to stay organised and have a system to track progress.
4. Attracting and Retaining Talent
When you are a small business owner, one of your key aims is to build the perfect team around you – this will help with day-to-day activities and ensure that everything runs smoothly. Small businesses may struggle to compete for top talent against larger companies with more attractive employee benefits packages. Additionally, most small businesses will require skills that can handle a variety of responsibilities.
How to solve it:
Some great recruitment strategies to attract and retain talent include offering competitive salaries, regular performance evaluations, or flexible working hours to assist employees in having a positive work-life balance.
Don’t neglect the importance of team-building activities, office parties, and other enjoyable events. It’s also critical for companies to promote from within to show employees that you are invested in their development.
The pandemic has significantly impacted those in the workforce, with employees now demanding greater job flexibility as the norm. According to data from Forbes, 40% of employees from large businesses prefer to quit to have flexibility. This is an excellent opportunity for small businesses to entice potential employees with this perk.
Forbes’ recommendations for retaining great staff for small firms include:
- Providing staff autonomy in their work
- Offering a community
- Ensuring that your organisation’s brand story is straightforward and
- Focusing on innovation and strategy
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Small businesses often find it difficult to compete with larger companies with regard to marketing and advertising. This is because they typically have a smaller budget and fewer resources available. Additionally, small businesses may not have the time or manpower to create effective marketing campaigns.
A Semrush survey found that 63.9% of small businesses that “Having enough time and resources to focus on marketing” was a problem in 2021.
How to solve it:
The most effective approach to overcome this difficulty is to create reasonable marketing objectives for your campaign and ensure that all stakeholders know the plan. You should also measure outcomes and make adjustments as needed.
There are a variety of best practice marketing techniques for small businesses, depending on your current needs or objectives. For example, your business could utilise marketing giveaways by providing branded T-shirts, hats or other branded items to customers.
How much does marketing cost for a small business?
Research shows New Zealand businesses spend approximately 5% of their revenue on marketing, while small firms pay a more significant proportion. However, this can vary based on the sector and firm.
One of the many benefits of digital marketing for small businesses is that it targets a specific audience and allows you to measure results at a fraction of the cost of traditional marketing methods.
Digital marketing strategies include:
- Website: A website is a great way to introduce your small business to potential customers. SEO techniques can also be used to improve your website ranking on search engines. Likewise, Iif you have an ecommerce store, you can easily track your KPIs in order to measure the success of your business.
- Social Media: Some great social media marketing tools for small businesses include Facebook, Instagram and, LinkedIin. There are a plethora of examples of marketing strategies for small businesses on these social media tools that you can gain inspiration from for your own campaigns.
- Email Marketing Email marketing is a great way to reach out to customers who have already shown an interest in your company. Some of the best email marketing providers for small businesses to consider are Mailchimp, Sendinblue or Getresponse.
Digital marketing is also an excellent method to enhance your customer touchpoints. Check out other great ways to communicate with your customers by reading our article, 8 Tips For Communicating Throughout The Delivery Process.
Many small firms may be hesitant to utilise a marketing agency due to the cost. In fact, 47% of small business owners handle marketing independently. But if you don’t have in-house staff with experience in digital marketing, consider hiring a consultant or marketing agency to help you develop and execute your campaign. Outsourcing your marketing and advertising tasks can save you time and let you get on with the tasks that require your specific attention.
Impact of Covid-19 on Small Businesses in New Zealand
Aside from the usual challenges small businesses face, the latest issue is COVID-19.
The pandemic has had a significant impact on small businesses across the globe, with many forced to close their doors. In April 2021, the OECD discovered that between 70 – 80 % of small to medium enterprises had a 30 – 50 % revenue decrease in 32 countries. With sick employees, supply chain issues, lockdowns and reductions in customer spending, the risk of business closure has been incredibly high.
But let’s concentrate on the small firms that succeeded throughout the epidemic.
What did the successful Small and Medium businesses do that others didn’t?
- Drove digitisation,-
- Included automation and shifts to online channels
- Provided remote or hybrid employment;-
- Reorganised and reskilled for operational efficiency;-
- Became more agile,-
- Increased the pace of product and business model innovation.
Resolving these challenges can be difficult, but it’s not impossible. It’s essential to keep a positive attitude and continue to work hard. Many small enterprises in other countries are optimistic about their company’s future following Covid-19, with 78% expecting to survive.
In New Zealand, Xero reports that small business sales increased by almost 16% year-on-year in November, compared to October. Small firms in New Zealand have a lot of opportunities for success, and if you ever need help, there are plenty of resources available to you.
Small businesses are the backbone of every economy, especially here in New Zealand. They create jobs, drive innovation and stimulate economic growth – all things we like to see happening.
However, starting and running a small business is not without its challenges. It requires courage and grit and is no small feat. To set yourself up to be as successful as possible, make sure to reflect on the challenges others have faced and put plans to overcome them.