How to Identify Barriers to Small Business Growth

How to Identify Barriers to Small Business Growth

Three-quarters of small businesses want to grow their business over the next three years, but figures suggest that only a third of small businesses managed growth in the previous three years [PDF].

It's clear that barriers to growth exist. Small businesses face an obstacle course on their journey to growth, with barriers such as lack of funding, staff shortages, and red tape all blocking the path.

Before you can hope to surmount these obstacles, you need to identify them. Not sure what's holding your business back? Read on.

Identifying Barriers

owl eyes close up

Before you can attempt to leap over your company's barriers to growth, you need to know where they are and what form they take.

You might be able to list your biggest business problems off the top of your head, but are you certain they're the root cause of your woes?

We often like to blame external forces outside of our control for our problems, but in some instances, we're equally at fault.

It's difficult to admit this when it comes to your business - every entrepreneur gets defensive when their Big Idea receives even the smallest hint of criticism!

However, it's in your interest to scrutinise your own business as well as external factors.

Even if it hurts a little to look at your company in a negative light, you need to do it if you want to stand the highest chance of boosting business growth.

Start off your search for growth obstacles like this:

  • Speak to managers. Ask your managers for insights. Keep the focus on wider business issues instead of blaming individuals.
  • Speak to employees. Employees may have more revealing insights into the day-to-day reality of working for the business, so they're well placed to spot certain types of issues. Provide anonymous avenues for feedback to find out the truth!
  • Look at the numbers. How are your marketing and advertising campaigns faring? Where have business costs grown quickest? Which products aren't selling? Look at your KPIs and focus on metrics that you're struggling with.
  • How are your competitors faring? If your competitors are struggling too, it's more likely that your biggest barrier is market-based.

After carrying out this basic research, you'll have information from a range of perspectives to help you understand your barriers to growth.

Sort employee and manager responses into categories based on their content, and see which areas your business seem to crop up most frequently.

Now's the time to start digging deeper...

Gather More Data
Let's say that you've figured out your business is struggling because your core product is too expensive compared with comparable products of your nearest competitors.

At first glance, you have two options:

  • Lower the price
  • Improve marketing and advertising campaigns to better communicate the products' advantages over comparable products

You might automatically opt for the second option because it'll lead to less financial pain, but there's no guarantee you'll make progress.

Before heading down that route, dig deeper.

Ask for more feedback. Not just from employees, but from customers or clients, too. Measure the impact of a temporary discount. Find out what's stopping your customers from recommending you to others.

Apply a similar process to any business problem you've identified. This could take days or even weeks to complete, but it's well worthwhile if you want to overcome your business barriers.

By now, you should have identified the specific, underlying problems that are causing your business growth to slow or even reverse.

Types of Barriers 

rickety wooden fence

Generally, growth barriers fall into two categories: external and internal.

External Barriers

External barriers are limiting factors outside of your business, including:

  • A struggling economy - recessions, slowdowns, uncertainty.
  • Higher tax burden - corporation tax, NI contributions, business rates.
  • More red tape - new UK/EU regulations impacting your product and/or the business itself.
  • Negative press or social media coverage - harming your business or the market as a whole.
  • Increased labour costs - as a result of statutory wage increases or pension obligations.
  • Labour shortages - either seasonal or long term.
  • Saturated market - no opportunity to gain new customers.
  • Competitors expanding - their funding and resources dwarf your own.

These external barriers might seem completely out of your control, but in most instances, you can make adjustments to your business to reduce their impact on your business.

For example, if the market appears saturated, work hard to find a new niche within it. Keep track of trends and changes, and figure out how to differentiate your product so that it stands out in a crowded market.

Sure, it's not that easy to completely reposition your brand, but it might just be necessary if you want to continue to grow your business.

Internal Barriers

These are factors within your business that are holding you back. They might be standalone problems, or they might be connected with external problems.

  • Insufficient capacity - production, logistics, staff management.
  • Lack of strategy - positioning, growth, targets.
  • Lack of skills - short-term, seasonal or long-term.
  • Poor management - lack of organisation, poor communication, morale problems.
  • Too many managers - cost, productivity, growth implications.
  • Low productivity - in specific teams, in specific roles.
  • Lack of office space and facilities - software, hardware, desks, specialist equipment.
  • Product-market mismatch - ineffective marketing communications, low retention rates, difficulties with referrals and recommendations.
  • No innovation or risk-taking - a 'good' product isn't good enough, not taking advantage of trends and new technologies.
  • Cash flow problems - limited funds, problems chasing payments, forced to pay bills late.
  • Poor leadership - loss of direction, reduced morale.
  • Specific department woes - staff shortages, lack of resources.
  • Single client dependency - can't risk upsetting most valuable client(s) because they're responsible for a high proportion of your revenue.

One, two, three, or more of these factors might be holding your business back. When combined, these problems intensify, reducing your company's resilience to external and internal shocks.

Understanding how your business problems interact is vital if you're to overcome them.

Overcoming Your Business Growth Barriers 

man going up stairs

We can't offer advice on how to overcome every single obstacle you might be facing, but we can give you some general tips for leapfrogging these barriers.

First, look for alternatives to the traditional or obvious solutions. For example, if you're struggling to secure funding, research alternative finance options. Struggling with staff management? Look into specialist rota software instead of struggling on with Excel spreadsheets.

Next, don't be afraid to seek outside help. Either find a business mentor to help you out, outsource processes you're struggling with, or look for government funding options.

It's also a good idea to rethink your basic business assumptions - is your product really solving a problem for your target market? Are you taking the right approach to sales? Is your business plan viable and sustainable?

Don't forget to look outside your usual circle of senior managers, board members and advisors when making changes. Listen to feedback from all levels of your business - this will expose you to new ideas and ways of thinking that you might not have considered.

Finally, monitor the key metrics associated with any change you make. Track figures before, during and after you've tried to fix your problem so you can understand how effective your solution is.

Final Thoughts

Identifying the specific underlying reasons behind your businesses' sluggish growth isn't a pleasant process, but it's a necessity if you want to find your way back to the path to growth.

Don't assume you already know the problem - dig deeper and gain as much information as you can before taking decisive action to resolve your problems.

Want more business growth tips? Check out our business growth blog archives!