12 Big Challenges Facing Small Irish Businesses Today

Small Medium Enterprises (SMEs) represent 68.4% of all Irish businesses. Considering they produce 34.5% of Ireland's Gross Value Added (GVA), they’re the backbone of the Irish economy.  

Despite this, more than two-thirds of Irish SMEs believe they may have to shut down next year because they’re struggling to overcome challenges that are crucial for their sustainability and growth. 

This article will uncover 12 of the biggest issues they’re currently dealing with.

SME Challenge #1: Rising costs 

70% of Irish SMEs fear closure due to escalating business costs (such as rent, wages, utility bills and corporate tax rates), with 40% claiming that these, and the current economic turbulence, are their biggest challenges. 

To overcome this challenge, nearly two-thirds of SMEs are looking to expand their online presence to increase their reach, hire staff from overseas staff, or start sourcing from international suppliers who are located in more stable economic climates. But all these options require a significant cash investment, which many don’t have access to, and banks remain wary about lending to smaller businesses. However, if these SMEs are undertaking R&D work, applying for R&D tax credit relief could be the answer. More on this, later!

SME Challenge #2: Advancements in technology 

Although technology is designed to improve productivity, efficiency, customer satisfaction and competitiveness, it will only bring these benefits to the businesses that keep up with the latest trends. 

SME founders must continue to upskill their employees (and themselves) and invest in digital technologies if they are to stay afloat in the turbulent sea of competitors. 

But, it’s not that easy: Many Irish non-digital SMEs still can’t get online because of poor broadband connectivity, meaning only 30% of Irish SMEs are actually marketing and selling their products or services online. Out of those, only 20% are using online ad tracking and only 14% offer their customers basic online features, like live chat. 

To overcome this challenge, some Irish SMEs are tapping into government initiatives that are aimed at promoting digital adoption such as the Digital Connectivity Strategy and The National Digital Strategy (NDS), Harnessing Digital: The Digital Ireland Framework.

SME Challenge #3: Staffing shortages

Around 90% of SMEs in Ireland are struggling to meet demand because they can’t recruit or retain employees who have the right skills and qualifications, especially in customer-facing and managerial roles. This is drastically stunting their growth.

To overcome this challenge, 1 in 5 SMEs are hiring overseas employees. But this isn’t without its downfalls: Applying for work permits is a complex and lengthy process that desperately needs simplifying if Ireland is going to broaden its nets and catch top talent from across the world. 

SME Challenge #4: Supply chain breakdown 

Although COVID was over three years ago, businesses across the world are still struggling with supply chain costs and logistics, Irish SMEs are no exception. Couple COVID with the Russia-Ukraine war and Brexit and you’ve got an uphill supply chain struggle that Irish SMEs are bearing the brunt of. 

To overcome this challenge, and manage the backlog, delays and disruptions to supply, 62% of Irish SMEs have implemented new strategies such as changing their suppliers from British to EU ones or moving from a just-in-time model with substantial outsourcing, to a just-in-case model with on-shoring. But these strategies all, unfortunately, come with an expensive price tag. 

SME Challenge #5: Competition

1 in 4 Irish SMEs see emerging competition as a growing concern, with 24% confirming that new entrants into the market presented a big challenge to their business last year. 

This is because the overall trading environment has become more and more competitive.  With rising costs, advancements in tech, staff shortages and supply chain issues to deal with too, SMEs–due to their size and limited resources–often find it tough to compete with the big-hitters, who have the resources and capital available to navigate through the tougher times.

To overcome this challenge, more and more SMEs are starting to invest in innovation, taking advantage of government-backed incentives such as the R&D tax credit initiative and innovation grant schemes that are available to specifically help SMEs fight this issue. 

More on this, at the end.  

SME Challenge #6: Disposable income 

COVID-19 increased the cost of living, ramped up rent and slowed wage growth, which meant that disposable income for Irish consumers dropped by 25% and consumer spending declined by 36% over that period. 

However, as the economy is slowly turning a corner, the average disposable income level increased by 4.7% last year. Although this is good news for Irish SMEs, it is only a small increase. Plus, as we established earlier, SMEs still have high overheads and rent to pay, and face a struggle to keep up with rapidly advancing technology.

To overcome this challenge, SMEs need to accept the trend towards online shopping. Online stores don’t need to pay rent or bills (apart from hosting costs, but they’re a fraction of the cost of renting a high street store location), and online is where the customers who have money to spend are. More on that, next…

SME Challenge #7: The slow death of the high street 

Brexit, COVID, changing consumer habits, and the cost of living crisis are slowly killing the high street: 650 Irish firms are expected to shut this year, which means fewer and fewer customers are venturing out onto the high street, preferring to shop online, hunting out bargains from the comfort of their sofa. This appears to be an unstoppable global trend with Wall Street predicting that 50,000 retail stores will close within the next 5 years. 

To overcome this challenge, SMEs are moving their stores online. With the influx of user-friendly, plug-in-and-play website builders–like Wix, Shopify, or WordPress–that don’t require any coding experience to use, it’s so much cheaper and easier to move a business online, than it used to be. 

SME Challenge #8: Strategy and Forward Planning

Dedicating time and resources to long-term strategic planning is a struggle for SMEs who often have to wear many hats and spin multiple plates due to money, resource and time pressures. 

Planning for the future often gets deprioritized in favour of completing day-to-day tasks that enable the business to simply keep going. But having a roadmap for the future, and making sure it’s reviewed and updated regularly, ensures there’s a clear growth plan which informs essential decisions that could make or break the business. 

To overcome this challenge, the onus is on the business owner to make the time. Somehow. The pay-off will always be worth it.

SME Challenge #9: Smart working 

Since COVID-19, being able to work remotely is something that most employees now expect from their employers. But this requires employers to invest in technology, equipment and good internet connection (which, as we established earlier can be an issue for some, especially in rural parts of Ireland).

This can present serious productivity problems for SMEs and also raises challenges when it comes to protecting sensitive company data, remotely.

To overcome this challenge, SMEs are turning to the Small Firms Association (SFA), which offers information on how to keep technology secure and what collaboration tools can be used to make sure businesses stay connected with their employees. There are also co-working spaces that can be hired, and the hybrid working model offers a good compromise, allowing employees the freedom to work from home, but also ensuring that they pop into the office once in a while.

SME Challenge #10: Regulations and guidelines

Government laws, regulations and guidelines are always changing. While these updates and changes are usually made to support clients and employees, it can be tough for SMEs because they’re often difficult, time-consuming and expensive to implement. 

For example, the Employment Bill states that all employers must give employees their terms of employment, in writing, within five days of starting the job. This might not seem like a big task if that was the only thing you had to do that day. But in reality, tasks like this are arduous, complex and time-consuming, on top of everything else.

To overcome this challenge, there are plenty of editable contract templates that SMEs can use to speed up administrative tasks like this. 

SME Challenge #11: Marketing

Marketing takes time: You need to conduct market research, develop customer profiles, create social media strategies (and then implement them), publish content regularly (ensuring it remains on-brand), create case studies.. (the list could go on). And, to survive in an overcrowded marketplace, with competing brands shouting louder and louder to gain their share of the market, the pressure is on SMEs to create effective marketing messages and campaigns that draw customers in. This requires experience, skills and time, which a lot of SMEs don’t have.

Whilst marketing is an ongoing exercise that will always haemorrhage time, it does need to be prioritised, if a business is to develop and grow. 

To overcome this challenge, SMEs could try: 

  • Taking quotes from customer feedback surveys to post on social media 
  • Asking their customers to create content, like review videos, for example
  • Using image creation tools, like Canva, to quickly design professional-looking brochures, posters, infographics and social media images. 
  • AI tools like ChatGPT to churn out content (this content will always need editing afterwards though, to make sure it a) doesn’t sound robotic and b) captures the brand voice).  

SME Challenge #12: Investing in growth

To survive long-term, SMEs need to grow and innovate, but this requires cash that a lot don’t have access to. SMEs tend to put revenue earned back into the business to help with costs, pay for staff and keep themselves alive. 

To overcome this challenge, many SMEs are taking advantage of Research and Development (R&D) Tax Credits. This is a government-run initiative designed to encourage innovation across all sectors in Ireland. 

SMEs can claim up to 30% of their qualifying R&D expenditure, in addition to a 12.5% reduction in corporate tax, resulting in a 42.5% R&D tax benefit. 

Want to find out more? 

Get help with your R&D tax relief 

Submitting an R&D tax credit claim can be a long, complex and expensive process. As a  result, many SMEs aren’t getting the maximum amount of R&D tax credit available to them, because their application is often incomplete or filled with mistakes. 

This is where Tax Cloud (backed by R&D tax credit specialists, Myriad Associates), can help. 

Tax Cloud is a self-service R&D tax credit portal that allows you to submit your R&D tax claim, without paying for an R&D tax credit specialist, directly. The system guides you through each step of the claims process, making sure you’ve submitted all the right information and documentation. Right before you submit your application to the Revenue, it’ll be reviewed by one of Myriad Associates' tax specialists to ensure you’re claiming the maximum amount of tax relief possible.

Call us on +353 1 566 2001 or fill out a contact form for more information, we’d love to help your business thrive.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
Start your Tax Cloud claim now Discover if you qualify and ensure your R&D tax claim is maximised. Get started
Powered by Myriad Logo

Myriad are the creators of Tax Cloud, we help enterprises navigate, apply and secure tax incentives and grants. We specialise in R&D Tax Credits, Enterprise Ireland grants, Horizon Europe grants, and the Digital Games Tax Credit

  • Submitting R&D tax claims since 2017
  • Strong track record delivering R&D tax credit claims
  • Over €10m claimed and counting
  • Industry leading specialists
  • We employ technical, costing and tax experts
  • Confident of delivering value to our clients, we offer our R&D tax services on a success fee-only basis.

Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
Jillian Chambers Jillian Chambers Technical Analyst/Writer
Lauren Olson Lauren Olson Technical Analyst Manager
Rabia Mohammad Rabia Mohammad Corporate Tax Associate