Breaking Down Barriers to Growth for SMBs
Small and medium sized businesses (SMBs), including franchises, have an influential role to play in the economic health of their communities, and in the country as a whole. To maintain this influence and prosperity, they must have a strong focus on delivering growth. Generating growth is a huge milestone—it’s a foundation for the future, providing stability, security and protection against risk—but small and medium businesses face barriers that inhibit this growth.
In my conversations with the SMBs I’ve engaged with recently, I’ve learned that there are four common issues that stifle their prosperity and potential.
1. Difficulty securing funding
SMBs, including franchises, need capital for critical assets that help them grow their business and stay competitive, such as office equipment or software. Yet, it is harder than ever for them to secure this financing. The number of banks willing to lend to SMBs is falling as financial institutions favor larger, more profitable loans, and this lack of access to financing is inhibiting growth and stifling potential. As a result, SMBs are looking beyond the more traditional institutions towards alternative financiers and partners to find the solution they’ve been looking for. Pitney Bowes recently launched Wheeler Financial, a new subsidiary dedicated to helping small to middle market clients acquire the critical assets they need to grow and expand their business. Wheeler Financial will help clients purchase new equipment and services critical to the industries in which they operate with loans, leases, and other financial structures.
2. Constantly-changing compliance
Regulatory compliance is critical for every SMB and franchise. The risks of non-compliance are high, with businesses facing severe penalties and serious reputational risks if things aren’t done the right way. For some, the answer lies in outsourcing or partnering with experts, but this is often a short-term solution and can be costly. The SMBs I’ve spoken with that have succeeded in addressing compliance concerns are those that have invested in the technology and processes that improve efficiency and productivity and drive compliance at the earliest point. Leading businesses are those that communicate changes and coach employees in behaviors that drive compliance, adopt a culture of best-practice compliance across their organization.
3. Pressure to stay relevant and deliver the best customer experience
Keeping up with consumers’ rapidly-changing expectations is difficult for businesses regardless of their size, but for smaller companies with limited resources, it can be particularly challenging. On the positive side, American consumers have a strong sense of loyalty to SMBs. A study by consumer group, Gallup, found that seventy percent of US consumers have confidence in SMBs – the highest rate since the study began more than a decade ago. Respondents in the study revealed that consumers see SMBs as the American dream and the backbone of the economy. The strong affinity consumers have with SMBs presents a great opportunity for them to differentiate and drive growth. Investing time and resource into customer retention, rather than on new customer acquisition, generates a strong return. In fact, a study from Bain and Company found that increasing customer retention by just 5% can increase profits anywhere from 25-95%. Smaller businesses know their customers’ buyer behaviors and preferences, meaning they have the ability to drive engagement, build relationships and deliver relevant, effective communications.
4. Difficulty in managing rising costs
Prices continue to increase – fares rise, real estate rents soar, insurance rates go up, utility bills increase. Franchises and SMBs are permanently being squeezed by increasing costs to their business. These escalating costs hurt businesses and hinder growth. Unfortunately, there is no quick fix to containing costs, but a carefully-planned approach to cost control can make a big difference. Investing in technologies that automate processes and ensure value helps. Negotiating better tariffs for cell phone contracts, broadband and utilities can be surprisingly effective. Embracing different ways of working, such as moving to SaaS or encouraging homeworking can also reduce the burden of cost on an SMBs’ bottom line, freeing up costs to dedicate to growth.
SMBs and franchises will continue to deliver innovation and drive our economy. Those that successfully overcome these hurdles will undoubtedly generate growth and prosper in the future.
Christopher Johnson is Vice President and President, Global Financial Services (GFS) at Pitney Bowes. Christopher is responsible for the financing and lending businesses, as well as the consumer and merchant payments and risk management functions across the company. He also has leadership responsibility for the Pitney Bowes Bank, a state chartered industrial loan company.