How to identify barriers to small business growth

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

Before you can overcome any barriers to your business growth, you need to identify what they are. But how do you figure out what's holding your business back? That’s where we come in…

Identifying barriers to small business growth

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 difficulties, but in some instances, we can also be at fault. It's tough to admit this when it comes to your own business, though. Every entrepreneur out there is likely to get defensive when they receive criticism — that’s natural. What really matters is what you do in response to that sort of feedback. Because it's in your best interest to scrutinise your own internal processes as closely as you would any external barriers.

Even if it hurts a little to look at your company constructively, you need to do it if you want the best chance of growing your business. A good way to start identifying your barriers to growth is by:

• Speaking to managers. Ask your managers for their honest insight. Keep the focus on wider business goals rather than focusing (or shifting the blame) on individuals.
• Speaking to employees. Your staff may have more revealing insights into the day-to-day reality of your business. They’re well placed to spot problems and pinch points. Be sure to provide anonymous avenues for feedback to find out the truth!
• Looking at the numbers. How are your marketing and advertising campaigns faring? Where have business costs increased? Which products aren't selling? Look at your KPIs and focus on the metrics.
• Analysing your competitors. If your competitors are struggling too, it's more likely that your biggest barrier is market-based.

After this research and review, you'll have information from a range of perspectives to help you understand your barriers to business growth. Sort employee and manager responses into categories based on their content to see which areas are cropping up repeatedly.

Now you can start to dig deeper…

Gather more data

Let's say that you've figured out your business is struggling because your core product is more expensive than those of your nearest competitors. At first glance, you have two options:

• Lower the price
• Improve marketing and advertising campaigns to better communicate your product’s advantages over the competition

You might automatically opt for the second option because it'll lead to less immediate financial pain, but there's still no guarantee it’ll work. So before heading down that route, see what else you can find out.

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

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

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

Internal and external barriers to business growth

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

External barriers to business growth

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

• Cost of Living Crisis.
• Covid-19 and associated restrictions, staff shortages and lockdowns.
• A struggling economy - rising inflation, recession, slowdown, consumer uncertainty.
• Higher tax burden - corporation tax, NI contributions, business rates.
• Red tape - Brexit, changing regulations that impact 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 whose funding and resources dwarf your own.

Many external barriers might seem completely out of your control, but in some instances you may be able to make adjustments to your business to reduce their impact.

For example, if the market appears saturated, you could try to find a new niche within it. Track trends and changes, and see if it’s possible to differentiate your product so that it stands out in a crowded market.

Obviously, it's no easy thing to completely reposition your brand, but it might just be necessary if you want to continue to grow your business.

Internal barriers to business growth

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

• 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 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 - 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 the 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 and reduce your company's resilience. Understanding these problems and how they interact is vital if you're to overcome them.

Overcoming business growth barriers

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 spreadsheets.

Next, don't be afraid to seek outside help. Either find a business mentor to help you out, outsource the 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 otherwise considered.

Finally, monitor the 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.

Wrap up

Identifying the underlying barriers to your business growth isn't a pleasant process, but it will pay dividends, and really is a necessity if you want to succeed.

Don't assume that you already know what the problem is - investigate and gain as much information as you can before taking decisive action. Thought, support and data are the tools you need to try and resolve your problems and start to grow your business again.