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The top five challenges to business growth

Posted by Mike Atkinson on October 28, 2015

For small to medium-sized businesses, there are a number of factors that can inhibit the future expansion of a business – changing markets, the loss of a big client, inability to accurately scale resources. There are five main issues that constrain business growth. 


The top four challenges to business growth


1. Profitability

This is a big one that affects organisations of all shapes and sizes – and it is largely caused by margin pressure or a squeeze when customers choose a product or service based on the cheapest price. 


The reality is, in each market there is only one company that can offer the lowest price point. Yet in today’s competitive environment where the cost of doing business is on the rise, many businesses are still hesitant to raise prices (even though it could help boost revenue) because they are fearful of losing customers. 


Read more: How different pricing strategies will can impact your business


To compete successfully on price requires ongoing investment in process and operational improvements that effectively reduce the cost of doing business. The alternative is for businesses to refocus their selling proposition on quality and building customer intimacy.


Customer-intimate companies are those that define themselves as not just providing a product or service, but as helping their customers be successful through bespoke solutions. This requires a mind shift from being a supplier to being a partner and it relies on a business’s ability to anticipate their customer’s needs and delivering an experience that leaves their customers feeling closer to their brand.


2. Regulation

 Compliance, regulation and Government ‘red tape’ places a lot of pressure on small-to-medium-sized enterprises in New Zealand.


Each change, update or new requirement often requires a business to spend time and/or money on ensuring they comply – which results in a reduction in productivity, and sometimes a cost, to implement any modifications. A hot topic right now is the new Health & Safety legislation, which comes into force 4 April 2016.


3. Cash

It is common in New Zealand for businesses to have very tight cash flow and limited availability to capital, usually due to high debt.


The combination of these two factors tend to result in a weak balance sheet and restrict a business’s potential for growth. It is up to SMEs to consider reducing their reliance on debt, and looking at alternatives such as cash flow lending, debt factoring and even reviewing their ration of long term vs. short term debt.


4. Succession

Lack of preparedness in succession planning looms as one of the biggest issues facing NZ businesses.  Business owners may think they know the ropes but the landscape has changed - the labour market is tightening, sustainability issues are becoming a part of everyday business and consumer spending patterns are changing as our ageing population takes over. Therefore achieving continued growth requires a proactive shift in mindset towards how we do business with more progression in the direction of succession planning.


5. Good governance

A strong governance framework is extremely helpful when it comes to ensuring that enough time, energy and resources are invested in developing strategies to overcoming barriers to growth. Having an advisory board that is able to offer external support, guidance and advice, while holding you and your business accountable for taking action across these for areas, is invaluable for today’s growing SMEs.



For SMEs, implementing a good governance practices ultimately reduces their exposure to unnecessary risks and leads to opportunities for growth, financing and improved performance. Our FAQ guide provide the practical answers SMEs have been looking for.


Corporate Governance e-book

Topics: Business Growth