CEO standing at her desk overcoming small business challenges

15 Small Business Challenges—and How to Overcome Them

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Small businesses power economies worldwide, employing millions and driving innovation across industries. Yet their size and agility often come with heightened vulnerability. From shifting regulations to cross-border complexities, today’s globalized markets demand adaptability that few can sustain alone.

Economic pressures, such as inflation, supply chain disruptions, and talent shortages, compound these challenges, leaving many businesses struggling to balance growth with stability. The rise of AI, cryptocurrency, and remote work has rewritten the rules of competition, but adoption barriers remain steep. Simultaneously, compliance risks loom larger than ever, with data privacy laws, labor standards, and trade tariffs varying drastically by region.

For businesses eyeing international expansion, navigating these hurdles without local expertise can stall progress before it begins. This article examines 15 universal pain points small businesses face in 2025, from workforce management to financial resilience. More importantly, it provides actionable strategies to transform these challenges into opportunities, leveraging partnerships, technology, and scalable solutions.

The goal? To help businesses not just survive, but thrive in a borderless economy. Let’s jump right in.

1. Limited access to capital

The challenge

Small businesses often struggle to secure traditional loans due to stringent credit requirements, a lack of collateral, or limited financial history—barriers that are amplified in emerging markets. According to a 2024 Goldman Sachs survey, 77% of small businesses were concerned about their ability to access capital. This funding gap stifles growth, forcing many to rely on personal savings or informal networks during critical expansion phases.

The solution

Alternative financing models like revenue-based financing (where repayments scale with monthly earnings) and fintech platforms offering microloans or peer-to-peer lending provide flexible options. Crowdfunding, community development financial institutions (CDFIs), and grants tailored for SMEs also help bypass traditional bottlenecks. These solutions prioritize cash flow over credit scores, democratizing access to capital.

2. Navigating global compliance

The challenge

Expanding internationally introduces a maze of employment laws, tax regulations, and data privacy mandates that vary significantly by country. Compliance missteps in contracts, benefits, or worker classification can lead to fines, legal disputes, or operational delays—risks that small businesses lack the resources to mitigate alone.

The solution

Partnering with a global Employer of Record (EOR) eliminates the need to establish local entities. EORs manage payroll, benefits, and compliance in different countries, ensuring adherence to regional labor standards and tax laws. This allows businesses to hire talent globally while avoiding the cost and complexity of legal setups.

3. Talent acquisition in a competitive market

The challenge

A 2024 LinkedIn report found that 84% of small businesses cite talent shortages as their top hiring hurdle, with tech, healthcare, and finance roles being the hardest to fill. Competing against larger firms offering higher salaries or perks exacerbates the struggle.

The solution

Remote staffing unlocks access to a global talent pool, reducing reliance on local candidates. Global talent sourcing solutions streamline compliant hiring across borders, while AI-driven tools efficiently match skills to roles. Offering project-based contracts or flexible hours further attracts top candidates prioritizing autonomy.

4. Employee retention and engagement

The challenge

Nearly 62% of small businesses report difficulty retaining workers, who often leave for better benefits or career growth at larger firms. Limited budgets make it hard to match corporate-level perks, leading to costly turnover.

The solution

Flexible benefits—like telecommuting, wellness programs, or tuition reimbursement—cost less than raises but boost satisfaction. Cultivating a strong workplace culture through mentorship, skill development, and recognition programs also fosters loyalty. Regular feedback loops and clear career paths further enhance retention.

5. Currency fluctuations and global payments

The challenge

Exchange rate volatility can erode profit margins by 10% to 15% for businesses dealing in multiple currencies. Cross-border payment delays and hidden fees (e.g., intermediary bank charges) compound financial strain.

“This risk originates when a contract between two parties specifies exact prices for goods or services as well as delivery dates,” says Akhilesh Ganti, Commodity Trading Advisor at Investopedia. “If a currency’s value fluctuates between the time the contract is signed and the delivery date, it will cause a loss for one of the parties,” he adds.

The solution

Multi-currency payroll systems like Velocity Global automate conversions using real-time rates, minimizing exchange rate risks. Platforms with local banking integrations or blockchain-driven crypto payroll capabilities can reduce costs by 70% while ensuring timely payments. Locking in rates via forward contracts or hedging strategies adds further stability.

6. Limited technology infrastructure

The challenge

Many small businesses, particularly in regions with unreliable internet or limited digital literacy, operate with outdated systems. Manual processes for payroll, inventory, or customer management drain resources and hinder scalability.

“Employers report the greatest difficulty in finding IT and data skills,” Ger Doyle, country manager for ManpowerGroup USA, told Staffing Industry Analysts. There, they cite a survey that found 73% of managers reported that outdated tools were a barrier to operational efficiency, putting tech-limited businesses at a disadvantage.

The solution

Affordable, cloud-based platforms for HR, project management, and finance automate workflows with minimal upfront investment. Mobile-first solutions with offline functionality bridge connectivity gaps, while AI-driven analytics help prioritize tech upgrades aligned with growth goals.

7. Language and cultural barriers

The challenge

DeepL found that 35% of businesses report stalled global expansion due to language misunderstandings, while 32% struggle with customer engagement in multilingual markets. Nuances in negotiation styles, holiday schedules, or contract norms can damage partnerships—e.g., misinterpreting Brazil’s 13th-month pay mandate can lead to noncompliance.

The solution

Cross-cultural training programs and AI translation tools like DeepL improve communication clarity. Partnering with global EORs leverages localized expertise to draft compliant contracts and navigate region-specific labor practices.

8. Inconsistent customer demand

The challenge

Economic volatility and geopolitical shifts disrupt buying patterns. According to VikingCloud’s latest report, 53% of SMBs faced revenue drops during the 2024 dengue outbreak, while 60% admit they’re targets but underestimate the real risk. Seasonal industries, such as tourism and retail, face acute cash flow risks.

The solution

Diversify revenue through digital platforms (e.g., Shopify for global e-commerce) and dynamic pricing tools. Subscription models or hybrid services (e.g., virtual classes) help create stability amid fluctuating demand.

9. Data privacy and cybersecurity

The challenge

Data shows that one in five small to medium-sized businesses are forced to close after breaches, “with 32% at risk of closure from losses as low as $10,000,” reports Security Today. These small sum losses are seldom the case. According to Verizon’s 2024 Data Breach Investigations Report, the average cost of a small business data breach ranges from $120,000 to $1.24 million.

The solution

Adopt ISO-certified HR software with encrypted data storage and automated compliance reporting. Regular employee training, multifactor authentication, and partnerships with managed security providers reduce risks cost-effectively.

10. Lack of strategic HR support

The challenge

Fifty-seven percent of SMBs cite regulatory complexity as a growth barrier and a cause of errors in leave policies or contractor classification, which can trigger audits. Without dedicated HR teams, turnover costs reach 33% of an employee’s annual salary, straining already limited budgets.

The solution

Outsource HR operations to global partners offering localized compliance expertise. Services like Velocity Global’s EOR solution streamline payroll, benefits, and dispute resolution across more than 185 countries, minimizing legal exposure.

11. Difficulty scaling globally

The challenge

Forty-nine percent of small businesses abandon global expansion due to high entity setup costs and legal complexities. Cultural missteps, such as misinterpreting contract terms in Japan or benefits in Saudi Arabia, further hinder market entry.

The solution

Partnering with an EOR like Velocity Global eliminates entity setup costs and reduces the timelines for global expansion. EORs handle hiring, payroll, and compliance, enabling businesses to test markets in 72 hours while leveraging in-region experts for contract negotiations and labor law adherence.

12. Remote work management

The challenge

Managing remote teams across time zones and cultures often leads to fragmented communication, inconsistent productivity tracking, and security vulnerabilities. Without clear protocols, businesses risk misalignment—such as missed deadlines due to overlapping work hours or sensitive data leaks from unsecured home networks.

The solution

Adopt tools that streamline asynchronous collaboration, like encrypted messaging platforms and shared project dashboards. Define core hours for real-time meetings while allowing flexibility for deep work. Regular cybersecurity training and the use of VPNs mitigate risks without stifling autonomy.

13. Supply chain disruptions

The challenge

Seventy-two percent of SMBs lack real-time visibility into supplier disruptions, risking delays that impact annual revenue, experts at Red Hat report. “Extreme weather events, public health, terrorism, and war can overtake a company and its supply chain quickly. The statistical likelihood of certain types of events, such as blizzards, in a given area, may make them seem routine, but they can snarl supply chains nonetheless,” they add.

The solution

Diversify suppliers in more than three regions to reduce dependency. Adopt AI-driven inventory systems that predict shortages and automate orders during crises. Partner with logistics firms that offer regional warehousing to bypass trade bottlenecks, thereby cutting delivery times.

14. Economic uncertainty and inflation

The challenge

Rising costs for materials, labor, and loans force businesses to delay hiring or pause expansion. Currency devaluations in key markets further strain budgets, making it harder to price products competitively or retain top talent.

The solution

Optimize spending by outsourcing non-core functions (e.g., HR, payroll) to reduce fixed costs. Hire in regions with stable currencies and lower wage inflation, balancing global talent access with financial resilience.

15. Difficulty standing out in global markets

The challenge

Breaking into international markets often means competing with established local brands that already have customer trust and cultural relevance. Small businesses struggle with messaging that resonates across languages and customs, while limited marketing budgets make it hard to replicate the visibility of larger rivals.

The solution

Focus on niche differentiators, like sustainable practices or hyper-specialized expertise, to carve out a unique value proposition. Collaborate with regional influencers or micro-influencers to organically amplify your reach. Tailor branding to local preferences, such as adapting visuals for cultural symbolism, while maintaining core values.

View our global expansion series for more insights, starting with Part One, which explores international labor law and regulatory compliance.

Turn challenges into growth opportunities with Velocity Global

Velocity Global empowers small businesses by removing barriers to international growth. As a leading EOR provider, Velocity Global enables small businesses to hire, pay, and manage talent across 185+ countries without establishing legal entities. Our platform handles multi-currency payroll, localized benefits, and labor law compliance, ensuring teams stay focused on innovation rather than navigating complex administrative tasks. With real-time reporting and 24/7 support, businesses scale confidently amid economic uncertainty, tapping into cost-efficient talent pools while avoiding penalties from misclassification or tax errors. Get in touch to learn more.

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