Small Business Strengths - Bigger is not Always Better

11-October-2015 9:27
in Start Up Business Advice
by Admin

If you are anything like me, every once in a while you will cast an envious eye at the “big boys” in which ever industry you operate and catch yourself wishing that you could be more like them.  It’s easy to understand why that might be.  There are four key advantages that the “big boys” have over your small business and they will generally ruthlessly exploit these strengths to get and stay ahead of the pack.

1. Distribution

There is a reason why Pearson publishes so many best-selling books.  Likewise, there is a reason why Universal  Music Group sell so much music.  Distribution is the key to sales volume for B2C customers.  If you can’t get the product into the hands of consumers, you won’t sell it (in any huge quantity at least).

2. Talented Team

Big companies are filled with clock watchers and incompetency.  Amongst the dross, however, lies pure gold.  These exceptionally gifted people are drawn to companies that have long established reputations, stability and pockets deep enough to pay them what they are worth.  

3. Brand Equity

Would you sooner drink a Coke or some generic cola drink?  Would you sooner buy Nike trainers or Nicks?  Malboro cigarettes or Mayfair?  These companies have spent billions of dollars in building customer trust in their brands.  This is a huge advantage for the “big boys” which can seem difficult to surmount.

4. Access To Capital

The “big boys” have access to almost as much money as they could ever need.  A car manufacturer will regularly raise a quarter of a billion pounds to launch a new line of cars.  In industries where costs are high, access to cheap capital is what will separate the winners from the also rans.

It’s easy to look at these areas of strength with envy.  Your small business can never hope to compete on their playing field and if you were to try going toe to toe with the “big boys”, there’s only one way that will work out.  You would lose.

Don’t despair, though, as small businesses have many advantages and strengths that the “big boys” lost long ago.  The key is to play to those strengths rather than act like a big business in a small body.  What are these strengths?

1. Nothing to Lose

Big established companies are terrified of losing what they have.  When the aviation industry got off the ground, was it crowded with railroad companies or shipbuilders looking to integrate this new mode of transport into their operations?  No. Why?  They were too busy clinging to what they had to invest in what might be.  Small companies don’t have this problem and can therefore fearlessly pursue opportunities that established operators might pass up on.

2. Low Overheads

As a small business operating out of cheap offices with minimal insurance and headcount, no company car and as much volunteer labour as you can commandeer, you should be able to produce a product or provide a service more cheaply than the “big boys”.  If you can’t, you have chosen the wrong business.  By leveraging your smallness, you can undercut your bigger competitors, especially in less capital intensive industries.

3. Content With Less

Seth Godin has said many times that in the ocean, the first animals to die are the big fish, as they need so much food to survive.  The smaller guys can make do with the crumbs.  The major film studios routinely make films with production budgets of £50 million.  By the time you have factored in worldwide promotional costs, many of the wannabe blockbusters simply have to be blockbusters or these studios will lose a fortune.  £100 million at the box office is a high bar to set for a film to breakeven.  Independent filmmakers on the other hand regularly produce films on budgets that are one thousand times less than their major studio rivals.  That takes all kind of pressure off.  If you only need to make £100,000 at the box office to earn a nice return on your investment, you don’t need to be as great as the “big boys”.  Studios would fold on a £100,000 box office, whereas small businesses are happy with small fry.  Often, these are considered too small to even be of interest to the “big boys” leaving you free to plough your particular furrow for as long as you wish.

4. Agility

I often say that you can’t hire nine women to work really hard and produce a baby in one month.   In creative endeavours, size often works against you.  That’s why so much innovation comes out of small companies.  Sensible big companies don’t even try to compete on this front.  They stick to what they are good at: raising money.  That’s why you see big companies like Microsoft just buy up their innovative, smaller competitors.  Without question, smaller companies can be more agile and innovative. 

5. Time 

The “big boys” sacrificed their freedom to take their time as part of their drive to grow and access finance.  Now they have shareholders to answer to that want quarterly growth.  They also have to deliver on strategic plans drawn up five years ago that where the basis for a lot of that investment.  They can’t rush products or services to market and they cannot take their time over something if the shareholders are banking on their next dividend based on the timely launch of a new product or service.  Small businesses have complete control over the timing in their businesses.  They are free to be as fast or as slow as they deem appropriate.  And that can be a huge advantage.

Just as a kick around on the park is very different from the Champions League final, running a small business is very different from running British Petroleum.  If you can get over the inferiority complex and get on with leveraging the unique strengths of your small business, you’ll find success on your terms, not on the terms of whoever decided that “big is best”.