Common Problems Facing Small Business Owners

Running a small business can start off really exciting with ideas flying around and excitement of adding value to customers with the new product/service offering. However, business owner often find quickly that there are a lot of challenges come around the corner very quickly, these include:

Cash flow:

Often the biggest area overlooked or underestimated by small businesses but is by far the most important, profitability can look amazing but if you can’t pay the bills, the wheels can come off quickly.

We often see the scenario where a cash-flow forecast has been prepared, it all looks good and the business owner thinks they will have enough funds and everything is rosy. However, it is often not monitored on a regular basis, if it’s a month down the line, has the anticipated income actually been received? Your suppliers and HMRC don’t care that you’re showing great profits if you’ve no money to pay them? Would a key supplier putting you on stop affect your ability to deliver those sales and achieve those juicy profit margins?

What if you lose a key customer or they go out of business? Does your profit disappear overnight and can you still pay suppliers? What if an unexpected expense rears it head, can you cope? There are a lot of variables and for most small business preparing a one-off cash-flow forecast isn’t enough, it has to be constantly monitored and updated, ideally on a minimum weekly or monthly basis depending on the business.

Don’t let your business get to the stage where YOU HAVE TO manage cash-flow on a daily basis as it takes you away from spending time making those sales and growing the business to chasing money constantly and dealing with suppliers who become less patient, lower credit limits and payment terms, entering a viscous circle of the business owners job being to get cash in to cover bills and repeat.


Although, cash-flow is king, businesses can’t survive in the longer term without being profitable. A common thing I see when working with new clients is that they think the business is more profitable than it actually is. When you get under the hood they are often surprised and it stems from the fact that they’re taking money out of the business every month so think everything is ok.

Looking at a few key figures and ratios can quickly bring things to the surface. The first ones to check are turnover, gross profit, gross profit %, net profit and net profit %. These 5 things alone provide a powerful insight into where a business is.

The first question I usually ask is what’s the turnover? Quickly followed by what’s your gross profit %, this is either unknown or is always higher than it actually is e.g. a client tells me it’s 50%, we analyse the figures and it’s only 35%, this can be the difference between a thriving business and one that will go out of business soon. Gross Profit % is a key metric for a lot of small businesses and when budgeting for the next year, this percentage can be far more important than increasing your turnover and making sales. CAN BE FAR MORE IMPORTANT for emphasis. We have seen this a lot in construction lately where suppliers costs have been going up a weekly, sometimes daily basis, and these costs aren’t be passed on to customers, or aren’t being passed on quickly enough. The margin is eroding without your knowledge if you don’t monitor closely monitor and that be catastrophic for businesses.

Looking at the net profit and net profit %, we have to ask ourselves, was it all worth it? This is often an eye opener, even for experience business owner, who will see what all the risks, stresses, pressure, sleepless nights were for. Maybe they are taking a salary they are happy with and the profit at the end is a bonus but it’s important that it’s at the level that makes it all worth it.

Access to capital:

Every small business owner has thought at one stage, if I just had x amount I could do all these wonderful things and achieve all the business goals. Although, lots of small businesses struggle to secure funding from traditional sources such as banks, who often seem to want the business to prove that it doesn’t need any funding before they will provide it.

There are alternative ways of securing funding, such as angel investors, venture capitalists, crowd funding, other types of loans, grants, invoice factoring, government support etc. The one thing all these ways have in common is that the business has to be financially viable and that means that the numbers have to make sense and are realistic. A good accountant will be able to take your businesses current financial situation, discuss your goals and what you’re looking to achieve and develop reasonable projections to assist in your quest to access capital.


It’s also important to be aware of competitors and competition, businesses can often over and under estimate who is a competitor and what their response if any would be.

An underestimater of competition may think that their product/service is so good that no-one would be able to deliver what they deliver. They take it to the market and the response is great, the customers love it and all is going well as the sales roll in and the business owner thinks they’ve cracked it. Later, sales start drying up, the business owners starts researching and notices that a new competitors has entered the market doing exactly the same thing but cheaper, in response they slash the prices, sales pick up again but at a lower margin, said competitor now lowers their prices and the once thriving business is now struggling to make a profit.

Small businesses can often be in position where a larger more established business can offer the same product/service at a fraction of the cost if something becomes really popular due to their buying power which can’t be underestimated. The business may wish to protect it’s idea by applying for a patent at the early stages and could also apply for a trademark.

An overestimater of competition would worry that every competitor was monitoring their every move and that every decision and change that is made, the competitor would know about and would react accordingly. Often times, these business owners are stuck in their own head and fear making decisions or changes based on the perception of how a competitor will react.

It comes down to doing what is right for the business, while keeping a healthy eye on what competitors are doing, what is working and what is and tailoring small adjustments to suit. If a businesses customer service is so good, customer will need a good excuse to look elsewhere.

Economic uncertainty:

Some things are simply out of a small business owners control. If the country is in a cost of living crisis, then it’s natural for people to cut out more luxury items and look for cheaper alternatives. Businesses offering more luxury items may suffer a reduction in sales during these times, although it also presents opportunities, if a business focuses more on the customer needs at these time rather than the wants, it may lead to a thriving business. Adaptability in business cannot be underestimated, those who adapt to the changing environment faster will almost always be the winner.

Subsequently, things will change and people may have more disposal income again and may then opt for the more expensive and luxury options they were previously deprived of. Business owners need to keep up-to-date on changing factors which affect their business and take appropriate action when required as soon as possible to thrive.


A big challenge for small businesses can be attracting or managing employees. Whether that’s bringing in the first few employees or whether bringing in more senior members of staff as the business grows.

From understanding what the businesses responsibilities are, where to find the employees, how to interview, registering with HMRC for PAYE, creating employment contracts, enrolling for pensions, maintaining and monitoring the payroll, managing sickness, holidays, disciplinary procedures, it can all quickly become very overwhelming for small businesses owners and the burden increase as the business grows.

Most business owners want to focus on what they’re good at and what they enjoy, a lot often find their time taken on having to deal with the above taking them away from this. Outsourcing the payroll and often the HR function can be a godsend to many owners.

Do any of these problems sound familiar? If so, lets have a chat and hopefully we can show the value that modern personable accountants can add to your business.

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