Challenges for Small-to-Medium Sized Enterprises

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Challenges for Small-to-Medium Sized Enterprises (SMEs) can be numerous, as they often face challenges that bigger companies are largely immune to. In this article, we outline the main challenges that SMEs may face, and offer some tips on how to overcome them.


Access to funding is possibly the largest challenge faced by SMES. According to Alex Chesterman, CEO and Founder of real estate business Zoopla, “the last few years have been relatively tough from an investment standpoint.” Funding can be very difficult for SMEs, since mainstream lenders are often reluctant to fully engage with them and hesitant to invest a productive amount of capital.

Despite this, the rise of challenger banks, peer-to-peer lending and alternative lenders is beginning to make funding more accessible to SMEs, and this may become a useful avenue for small businesses in the coming years. A lack of funding can have huge knock on effects for your business, and in particular it can be a huge factor affecting inventory management. If funding is down, businesses will struggle to keep up with demand and may lose out on sales.

Increased Competition

Over the years, the marketplace has become increasingly crowded and competitive. In order to gain exposure, SMEs really need to hone in on their individuality and present their product or service as unique. To stand out from the crowd, businesses need to be very special in terms of idea, people, product and delivery.

SMEs need to identify or devise their own competitive advantage in order to stand out from the multitude of small businesses crowding the marketplace. Managers need to move faster and act smarter, to keep up with the proliferation of competition that appears to be increasing rapidly.


These days, businesses cannot be said to be completely autonomous because there is simply so many regulations and policies that companies must consider. This includes things like complying with the national living wage and pensions auto enrolment, among many other policies.

This excludes industry specific regulations that will apply depending on the industry you are in. The food industry, for example, has a myriad of policies that the company must contend with before it even considers setting up shop. Small business inventory management software can help food manufacturing businesses comply with safety and health requirements.

While larger businesses are often able to include the cost of running through these procedures as part and parcel of the cost to the consumer, it may not be that simple for a small enterprise. Keeping up with ever-changing regulations is a time consuming and costly affair, and this poses a big risk for SMEs who may be struggling with funding already.

These regulations can become a significant factor affecting inventory management, and may disturb your ability to manage inventory as well as you would like. Food industry regulations can be particularly stifling in terms of your inventory management processes.


SMEs are often lead by a small team of individuals with little to no real management experience. For example, a recent survey found that 71% of employees felt their employer could do better at providing first line management training, or did not offer any training at all. This is troublesome because bad leadership can have far-reaching effects in small businesses. For this reason, sourcing employees with adequate training in management and refined leadership abilities is key to the success of SMEs.


Employing skilled staff can be difficult for small businesses, considering the competitive advantage larger firms have in terms of higher salaries and better employee benefits. A successful business can be built on employing the right people with the right skill set, but the challenge for SMEs is first attracting and then retaining them.

An inability to source an adequate amount of staff can also be a significant factor affecting inventory management. For small businesses, this may mean that a small number of staff must look after all inventory management processes, and when demand increases this can translate to overworked, tired and error-prone employees.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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