The single most difficult aspect of running a small business

Something got me thinking the other day about the hardest thing associated with running a small business.  There were several candidates for the title of ‘most difficult aspect of running a small business’.

With my background in sales, the winning of new clients soon popped into my head.  This is undoubtedly tough, especially if you are up against strong competitors.

Then I thought about cash management and keeping the company solvent when clients seem to be taking longer than ever to pay their invoices.  Any number of new clients won’t save you from bankruptcy if they don’t pay their invoices.

Recruitment of new staff (or new subcontractors if you are taking the outsourcing route) was the third area in which I thought small business owners were likely to struggle.  The impact of recruiting the wrong person is extremely difficult to quantify but the increased costs and associated poor results are a dangerous combination.

In the end, I came to the conclusion that whilst these are undoubtedly difficult issues to get right, the one issue small business owners seem to find the hardest to deal with is differentiation.

What is it that makes their company stand out from the competition?  What is it that makes them better?  What extra benefits do they offer for which clients will pay premium prices?

How difficult is this?  Well, looking around there are many industries where competitors all look the same with no obvious differentiation.  There are a whole bunch of “Me-too” suppliers all chasing the same prospects.  This is not a good place for any small business to position itself.

 Buyers, when faced with an array of “Me-too” suppliers that all look the same, will find some way to differentiate them so the best supplier is chosen.  The only factor available to buyers, all other aspects being equal, is price.  Buyers will buy the cheapest and will force the price down as low as they can.

All suppliers without any discernible differentiation will, inevitably, struggle to generate enough profits to grow.  Their longer term survival is at risk.

It can be challenging to create points of difference that are hard to copy.  It is the creation of hard to copy differentiators that allow companies of all sizes to charge premium prices – provided their clients are prepared this extra more to receive it.

Hard to copy differentiators include features that are designed into the product or some combination of your specialist staff.  For example, a car with the first automatic park facility had an edge over its competitors until they could launch a similar feature.  A service company can claim to be unique if its clients can engage with one of its senior employees who is also a recognised expert in his field.

Building these differentiators is extremely time-consuming and does need careful planning.  They can give the company who puts them in place an edge over their competition for months and years. 

 Most small business owners try to create differentiation between themselves and their competition by resorting to relatively simple tactics.  Inevitably, these are all copied by the competition to neutralise any advantage that might have been gained.  Examples of this are longer opening hours, next day delivery, free delivery, range of colours, money-back guarantee, extended warranty and free servicing for 2 years.

The advantage gained by these moves would be short-lived.  It is far better to have something inherent within the design of your product that will take competitors significant time (say, 18 months) to build into their product.  In this case, you have the time to exploit the advantage and sign up many more new clients before there is any direct competition in the marketplace.  Of course, the feature you build into your product must be something that prospects will want.


  1. Look at your competitors and decide if you have any points of difference that makes you unique.
  2. Identify if they have anything which differentiates them from you.
  3. Determine how you will neutralise their advantages and exploit your own so as to set you apart.
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