small business challenges

4 Key Trends that will Bring Small Businesses back on the path of Recovery in 2021

The COVID 19 pandemic has forced many startups and small enterprises to shut down. According to a report published in Financial Express, ‘around 74% small businesses and startups in the country were at the brink of shutting down or scaling down of their operations due to the impact of the Covid-19 pandemic’.

The coronavirus breakdown and the subsequent lockdown by the government last year have hit small businesses hard.

However, with the onset of 2021, things have begun to look up. Despite 2020, being a nightmare in terms of changes and challenges, the year 2021 has shown a glimpse of hope for small businesses. The startups and small business owners are working hard to get back on track for 2021.

Embracing the new normal with persistence can open a doorway to post COVID recovery. From the changed consumer behavior to innovative online models, here is a list of trends that every entrepreneur, solopreneur, and small business owner must monitor:

Digital Adoption

The pandemic has set new rules for businesses. From large organizations to small companies, everyone has realized the power of digitalization in the crisis.

According to a report by Forbes, people are spending time online more than ever before, and internet usage is increased by 50-70 percent. With new social distancing rules and the fear of COVID 19, consumers are inclining towards digital transactions.

Many businesses have witnessed an increase in online orders and hence, revamping their models to find different mediums to connect with their customers. The adoption of digitalization will be the key to unlock a brighter future.

Government Initiatives

Small businesses have always been a hub for job creation. Government initiatives like Start-up India, Make in India, and Vocal for Local have benefitted the existing small businesses as well as the budding Indian entrepreneurs.

The Government can announce various other schemes to enable small business owners to sustain themselves in these challenging times. Such government initiatives can give small businesses a ray of hope to grow and revive themselves.

New Age Marketing Tools

Not only adopting modern digital tools and processes, but small business owners also need to learn the newer ways to reach new and existing customers. The world of the internet offers businesses to break away from the traditional barriers of location and time to engage customers. Every business owner should use this to shape their online presence and grow their customer base.

Discovering New Verticals

To stay abreast with the ‘new normal’, creative ideas that can help to discover the untapped verticals are the need of the hour. According to a NASSCOM study, ‘three-fourth of B2B startups are now developing new & innovative products’. Many small businesses pivot to new directions such as education, and technology services.

The chaos in the business world may simmer down in 2021, but the Indian startup ecosystem will continue to experience its effects for some more time.

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Common Challenges Faced by a Small Business While Seeking Funds

Running a business comes with a number of hurdles and challenges for a business owner. One of the most important and common issues for business failure is lack of capital to keep the business in operation. Educate yourself and understand the small business challenges in financing to avoid making these mistakes.

1. Lack of Capital

This is an important reason why start-ups often fail. The business owner doesn’t have a credit history or a track record that can help the lender evaluate the business and its creditworthiness. Having no track record does not mean that the business has no merit; it just means that the lender does not have anything to evaluate or compare it with. The lender needs to evaluate whether you can use the credit successfully. A study shows that business owners who have a better understanding of their business credit score are 41% more likely to get a business loan. Certain you need to keep in mind while asking for finance for your business:
The track record and business credit line will take time to build.
Analyze your business credit card and credit score.
It is easy to get qualified for a small credit value so maintain it and start building a good business credit profile. Make sure that you have good credit behaviour.
Try to get trade credit from your vendors and suppliers; it is one of the great ways to build a solid credit profile. You can show your suppliers and vendor’s credit track report as a good history to your financer.
Build a personal and business balance sheet supported by the income tax paid to justify your track record.
Create a detailed small business challenge plan that focuses on scalability, market size, product development, competition, and marketing strategy. This road map will help you to drive smoothly for the future. The idea is to anticipate challenges and work towards strategies that can help you cross these hurdles.

2. Difficulty in demonstrating you have the income to service debt

The financer always wants to know about your ability to service debt. They are more focused on whether you can make periodic payments or not? It is unlikely they will approve your loan if you and your business do not meet their income bracket or cash flow requirements.
There are many other sources of capital that do not require the same credit details.
A microloan can be a good option for you if you have the ability to leverage a small amount to produce a big result.
Crowd funding can be another option if you have a solid business idea.
Spend time to create a solid pitch and presentation which can motivate the crowd to donate.

3. Understand your financial reports

A common small business challenge is that some entrepreneurs don’t understand their financial reports. The financial report shows you the health of your business. Generally, you don’t have to be an accountant to understand it but you should be familiar with the metrics of your business accounts. Your financial report or the cash flow is critical to monitor the health of your business and it clearly indicates whether your business is ready to raise capital or not.
If you are not very good with accounts, you can always hire a charted accountant, an expert who can identify the potential gaps to improve your business profits and maintain a healthy cash flow.
To address the financial challenges, review, research and revamp your business plan again and again.
Dive more into your financial report to understand the numbers and to avoid any financial challenges in the future.

Overspending, a poor capital structure and lack of reserve funds are the common reasons why a small business owner fails. According to the Small Business Association, around 44% of small businesses survive for at least 4 years and then the business owners fail due to the immense financial challenges faced by them. So before seeking finance, try to work on the weak areas of your business. It is not that difficult to eliminate these small business challenges if the business owner exercises little caution and invests his time wisely to focus on the above tips.