Small Business: The 5 Major Problems in Growth

Planning for growth is the key to business development. Dealing with growth is a crucial issue for all developing companies. Successful company development depends upon profitable growth.

The problems in the growth of small or start-up companies can not be tackled in isolation because they are interdependent. Companies which grow without considering the key areas will eventually run into problems. This will result in crisis management which will hinder the company's development.

The 5 key problem areas

1. Lack of financial resources.

2. Management problems.

3. Inadequate systems.

4. Inappropriate marketing.

5. Lack of planning for future.

Lack of financial resources:

Under capitalization is one of the key reasons for failure of small business ventures. Lack of financial resources is a major problem for small companies. The small companies generally have four possible sources of funds which are:

1. Internally generated profits.

2. Overdraft and loan funding.

3. Additional equity financing.

4. Corporate venturing.

Cash is a key resource because, as well as being profitable, companies must be cash-generating to survive.

Management problems:

Any growing company must undertake a process of management development to ensure that the organization has a suitable management team which will meet its present and future needs. Management problems, in terms of lack of quality, experience and depth of management, have always been one of the major reasons for company failure.

The following areas must be explored:

1. Development of existing management.

2. Additions to the existing management.

3. Complementary relationships with external advisers.

Inadequate systems:

Small companies particularly in the start-up phase are characterized by a number of informal systems which rely on the direct involvement of the management. Control systems are set-up to provide information to the management. Information is needed for control and until you have control you can not increase performance. Major areas in which adequacy of the existing control systems should be examined are:

1. Financial systems.

2. Production systems.

3. Marketing systems.

Inappropriate marketing

Marketing problems are one of the main reasons for failure of business start-ups. Before a company enters into the expansion phase there has to be re-examination of the marketing approach. The marketing strategy will have to change as the company grows.

Lack of forward planning

The most crucial step in success is proper planning for the future. But total lack of planning or inadequate planning is the major problem of small business. This means that there is no systematic, analytical investigation of the business, its environment and options available to it in determining the way ahead.


A proper analysis of these key areas and adequate planning along with proper management will lead to assured success and growth of the company.

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