UK SMEs have faced and will continue to face a range of business challenges each causing a barrier to success. Despite these challenges, SMEs have proven to be resilient, with the business population increasing by 59% between 2000 and 2022. In spite of this, SMEs should still be cautious and prepare for potential challenges. So, what are the top four challenges that SMEs should be looking out for in 2023?
1. Rising costs and reduced revenue
Rising costs and reduced revenue is one of the biggest challenges facing SMEs today. In January 2023, The Office for National Statistics reported that, with the increase of inflation and the rising price of raw materials, 41% of SMEs have had no choice but to raise the cost of their products or services.
On top of this, due to the cost-of-living crisis, 70% of consumers have less to spend on non-essentials. This, paired with the increased cost of goods and services caused retail sales to fall by 0.9% in March 2023.
2. Staff shortages
The Office for National Statistics has reported that 89% of adults in Great Britain are still suffering from the effects of the cost-of-living crisis. With the cost-of-living crisis affecting almost everyone in the UK, business owners feel compelled to increase employee salaries. Unfortunately, not all SMEs are in the position to do so and are therefore at risk of losing their staff to other businesses offering a more competitive salary.
3. Expansion
Expanding your business is typically a sign of business success, however, there are growth-related challenges that come with it. These include the need for more staff, new skills, an in-depth understanding of the new market, quickly establishing a supply chain, finding transportation, warehouse logistics, and many more. These challenges can lead to delays, unforeseen costs, and sometimes, unsatisfied customers.
4. Securing funds
Funding continues to be one of the biggest challenges facing SMEs. Without the right funding, it can be impossible to run or grow a business. However, the market is changing, and finding the right funding for your business is not as challenging as it used to be. SMEs no longer need to rely on traditional banks for funding as there are many other options to choose from, including government schemes and angel investing.
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Read our other blogs in this series:
Top tips for SMEs on Expanding Globally
5 top tips to help make your business reach net zero