CHALLENGES FACED BY SMALL AND MEDIUM ENTERPRISES

 1. Unsuitable location of the business. Even if a business is properly managed, a bad location leads to its failure. For instance, locating the business far from the market (customers) or source of raw materials.

2. Limited market for the business products. This normally results from competition, changing customer tastes, uncompetitive prices, e.t.c.

3. Poor management of the business. Businesses which are poorly managed, for instance when they are inefficient in the use of resources, do not keep proper records, use wrong costing and pricing methods, inevitably make big loses and in the end fail and close up.

4. Poor handling of customers. No business can afford to survive with dissatisfied customers. A business whose owner or employees are rude to customers and do not bother to attend to their individual needs cannot take long before it collapses.

5. Limited market research. This leads to failure to clearly define and understand one’s market, one’s customers and one’s customer’s buying habits.

6. Over expansion. This often happens when business owners confuse success with how fast they can expand their business. Many bankruptcies have been due to rapidly expanding companies.

7. Inadequate financing. Some businesses may be having insufficient funds to buy the required technologies to improve their operations.

8. Choosing a business that is not profitable. In this case if one generates lots of activity, the profits never materialize to the extent necessary to sustain an on-going business.

9. Low quality of products for sale. This reduces the number of customers as they withdraw and go to other businesses which are producing better quality products. Faced with a declining number of customers and increasing competition, the business will inevitably fail and close up.

10. Inadequate credit services to provide entrepreneurs with facilities to enable them finance their business operations.

11. Inadequate support services like roads, telephones, water and electricity which make it difficult and expensive to operate these businesses.

12. Inadequate skilled man power to operate some production technologies, which forces businesses to hire expensive foreign experts. This increases cost of production, low profits and lead to business failure.

13. Use of inappropriate technology which does not optimize productivity and profitability.

14. Competition from imported manufactured products which are produced by well established businesses often of low prices.

15. Unreliable sources of raw materials which forces businesses to operate seasonally especially agro-processing businesses.

16. Improper product pricing. Small and medium enterprises at times fail to clearly define their pricing strategy. This results into over pricing of their products and eventually makes them fail.

17. Unconducive government policies relating to taxes which most businesses complain that it is high.

18. Unfavourable economic and monetary policies which make credit scarce, keep interest rates high and make it difficult for businesses to operate with borrowed capital.

19. Failure to anticipate or react to competition, technology or other changes in the market place. At times these businesses assume that what they have done in the past will always work. They tend to do things in the same way despite new market demands and changing times.

20. Mistakes made by the entrepreneur/founder’s inability. At times entrepreneurs lose interest in business because it does not suit their personal characteristics and as such they slacken/loosen their commitment to it in terms of supervision, funding, initiatives, creativity, e.t.c. As a result, the business loses direction and collapses.

21. Industrial unrests. These are in form of strikes at the work place which make operation of business difficult.