Small and medium-sized firms play an important role in the world economy. Studies by World Bank Group show approximately 10 million small and medium-sized firms make up 23 percent of the world’s GDP, an entire 80 percent of the hiring in the industries sector, and a full workforce or (labor force) of 25 percent.
The test for startups is to survive in a marketplace run and controlled by established companies with minimal resources and protection.
Small companies face risks like economic instabilities, ever-changing customer needs and behavior, and regulatory obstacles, and so on.
So what are some things worrying small entrepreneurs this year? We cover some of them to offer small entrepreneurs useful insights into the status of the market.
Tracing Failure Rates among Small Businesses
According to the 2019 Startup Failure Rate Statistics by Smallbiztrends.com, more than 50 percent of all US small businesses run operations up to year 4, and the rates of failure during the 4th year stand at 45%,
The same study revealed that among all US startups founded in 2014, a remarkable 80 percent reached year 2. This figure steadily reduces year-over-year from 70 percent to 62 percent and 56 percent in 2016, 2017, and 2018 respectively.
Biggest Worries for Microbusinesses in 2020
No lie, covid-19 is the biggest bane of your existence in 2020, and business owners feel the same.
From extreme measures like lockdowns to changes in customer habits, retailers and merchants have experienced the toughest moments ever amid a pandemic.
Figures from CardFlight’s Small Business Impact Report indicate transactions for SMEs dropped throughout March as customers maintained social distance and opted for e-commerce orders and deliveries.
CardFlight is a payment tech provider and had mined this data from its SwipeSimple platform that offers services to merchants across 50 US states.
It scrutinized over 60,000 small companies and found out that March sales had gone back-to-back for the 3rd week.
Sales for week 3 of March dipped nearly 12 percent and nearly 27 percent in Week 1—before the federal stay-indoors orders.
Meanwhile, cloth-selling and footwear brands in the UK still suffer amid a pandemic. Research by GlobalData shows an 8 percent drop in UK web-only sales compared to findings for 2019. According to GlobalData, changing customer habits is to blame.
Though many apparel brands are still making web sales through internet shops, customers who stay at home all day feel it less necessary to upgrade their wardrobes.
“Maybe, taking the most heat among affected internet markets are online travel agencies. Some time back, these travel agencies shook the market and stole the show. Today, the pandemic has come with unprecedented challenges. Group rides, in particular, have reduced significantly as customers keep their distance to avoid infection. Bookings have gone down significantly with Uber and Lyft facing an 80% and 75% drop in that order,” according to GlobalData.
With UK micro businesses in danger of almost 10,000 cyber-breach attempts per day and annual losses worth £4.5 million, security will continue to be an issue this year.
Phishing attacks are the most common approach, followed by (2) malware, (3) fraudulent payment requests, and finally, (4) ransomware over the last year.
In 2019, mobile-enabled a promising 80 percent of all e-commerce payments, which justifies why must are after the best mobile experience.
Sadly, m-commerce may not be as lucrative as it seems as its perils may outweigh its pros, according to TransUnion.
The Chicago branch of TransUnion’s E-Commerce in 2020 report was the result of an investigation into billions of last-year payments for any traces of mobile fraud.
And to everyone’s surprise, the researcher discovered mobile ecommerce payments had gone up over 30 percent in 2019 compared to 2018’s result.
TransUnion also reported a 118 percent rise in potential fraud from mobile payments initiated last year.
Real fraud, like shipping-related fraud and account-takeover rates, also rose.
Studies indicate a 347 percent rise in account-takeovers. In this trick, fraudsters take control of consumer accounts through tactics like social engineering or phishing.
“Consumer accounts carry invaluable personal credentials that cybercriminals look to steal. Fraudsters then use these troves of info to breach into accounts, acquire cardholder information and make fraudulent transactions,” says TransUnion.
Still, fraudsters prefer to attack through shipping scams— reports show it went up more than 390 percent.
This form of fraud happens when a fraudster uses a taken-over customer account to order items from an ecommerce store.
The phony buyer conceals their address to avoid exposure during the transaction, only to ask for a change in the delivery address while the item is in transit. That way, a scammer can purchase items without raising suspicion using taken-over accounts.
Cashflow remains a sticking point
Maintaining a healthy cash flow is a growing concern for small entrepreneurs. Guidant Financial featured a report titled “UK Small Business Trends,” indicating that nearly 30 percent of UK business owners mentioned “cashflow snags” as a worry.
Cashflow difficulties can be triggered by mistakes or unprecedented tough times such as falling sales, inadvertent spending, or poor cash flow management.
Still, the research points out past due invoices as a major hindrance to the flow of money in a company—more than half of UK businesses (54 percent) admitted they had past due invoices.
Meanwhile, Coronavirus has brought money and cash flow problems among merchants and retailers in the US. The challenge for many retailers is whether to stay in business or not and how to compensate workers if they choose to stay in business.
It’s true the US Government brought in relief funding branded the Paycheck Protection Program passed under the $350 billion CARES (Coronavirus Aid, Relief, and Economic (CARES) Act to address this paycheck problem.
But these relief sources have so far turned controversial as businesses complain of unfair terms and difficulty accessing them.
- First, the money was meant to be used strictly as follows; 75 percent on payroll and wages, and the other 25 percent on rent and utility. And the bank that offers you the loan will conduct an audit to confirm this.
This problem is because small businesses can’t use the money on anything else. You have to pay workers even if you have to shut down.
- Second, all the recipients were expected to max out whatever amount they received in 8 weeks.
Eight weeks may not be appropriate for businesses looking to enjoy the benefits of the funding in the long term.
- Furthermore, these loans are forgivable, but only if you follow terms, so failure to abide by terms & conditions means you will face repayment.
Number 3 also causes future financial problems because these finances come as relief loans, and every entrepreneur hopes to qualify for forgiveness.
Customer service seems to be on hold amid a crisis as piling orders exceed business preparedness.
Emarsys is a digital-marketing expert dedicated to an ongoing study analyzing the effects of COVID-19 on commerce.
A one-week analysis held in March by the firm reveals a 57 percent increase in ecommerce revenue. And of course, orders in online shops went up 45 percent.
But this increase in orders is not without its side effects. It has a trickle-down effect resulting in an influx of customer support inquiries.
Orders are piling up, leading to package delays because retailers struggle to meet demand amid difficult conditions and staff shortages.
Late packages usually mean more inquiries. Plus, many newbie shoppers still have a lot to learn about online shopping, which further adds to the number of inquiries.
Another group of shoppers is reaching out to confirm if packages can be shipped across borders. And all these must be handled by customer service personnel operating from their homes at the moment.
The critical role of customer service during such a pandemic is to assure customers that the brand is working to make things right against all the odds.
The sudden change in the normal order of activities can mean lots of confusion among customers— and unswerving support is the only way to keep things in check.
Studies from Zendesk Inc., a customer service platform, show customer support queries went up nearly 44 percent at the end of April compared to the findings in Feb.
Among the retailers recording a 10 percent or more rise in support queries, the use of chat went up 22 percent, while trips to self-help resources like FAQ sections increased 89%.
But findings also show phone calls are no longer a favorite, customer support through this avenue went down 24 percent.
Small business owners are definitely facing many other challenges, but the issues mentioned above are a sticking pain for many entrepreneurs around the globe.