Advantages of Being a Small Business

Small is beautiful, and we’re going to show you exactly why…

Starting a new business is incredibly daunting. It takes a lot of courage to set out on your own, particularly when you’re competing with more established businesses. Starting a new business is incredibly time consuming – most entrepreneurs will tell you that there simply aren’t enough hours in the day – and entrepreneurs are the ones who will work 80 hours a week to avoid working 40. There will probably be people who are close to you who are concerned that you’re going to end up wasting your time and money. After all, 80% of new businesses fail within 18 months, right? Why should it be any different for you?

The solution is simple. You need to work out the advantages of being a small business and milk them for all they’re worth. In this article we’ll be sharing 26 reasons why it’s an advantage to be a small business. We’ll also be looking at some of the disadvantages that larger and more established businesses face.

What are the Advantages of Being a Small Business?

The first step in considering the advantages of being a small business is to change the way you think about new and startup businesses. We’ll do that with a little help from the author and journalist Malcolm Gladwell.

Gladwell has written a book called David and Goliath in which he explores what it really means to be an underdog. He explains that things are often different to how they seem. He looks at the ancient biblical account of David and Goliath – a story that most of us know well – and unpicks a whole load of factors that  most of us would never even have considered. His conclusion? Sometimes it’s better to be the underdog than to be established, because being an underdog forces you to think and behave in ways that have some incredible advantages. Gladwell helps us to see that too often we define strength in the wrong way. Sometimes big can be vulnerable and small can be strong.

If you want to get a better understanding of what Gladwell is saying then you can watch the TED talk below. If not, keep reading as we dive into some of the advantages of being a small business. Some will be obvious, but we hope that others will inspire and motivate you to succeed.

1. Flexibility

Perhaps the greatest strength of small businesses is their ability to adapt to circumstances quickly and efficiently.

If market conditions or technological advances mean that your products are significantly less desirable, you can quickly and easily make the decision to revamp your product range. If a customer or client comes in with a particularly unusual order, you can drop everything to make it happen. You’re invited to a trade event next week? Chances are you’ll be able to get there. Yes, large companies can do these things, but the bureacracy and decision-making processes that have to be undertaken first often mean that opportunities are missed.

In true Gladwell spirit, even facets of small businesses that look like weaknesses can actually be strengths. The fact that cashflow is so important – and you have limited borrowing capacity – helps you to keep a close eye on the purse-strings. Companies like Jessops and Kodak spent years losing money before finally closing their doors.

2. Being the Underdog

Another truth that Gladwell goes to great lengths to underline is that being the underdog can be a terrific advantage in business. If you’re constantly going up against larger competitors then you should be encouraged; it might just play into your hands.

Underdogs tend not to be complacent because they know how hard they have to work if they’re going to take on bigger rivals. In the sporting arena, this means training harder and identifying tactics that will play to their strength and nullify those of their opponent. In warfare, smaller armies have tended to plan campaigns that brought their enemies to them and used the element of surprise; think about the guerrilla tactics used in the Vietnam War.

In a business context this can take various forms. Here are some ways in which being the underdog might just be the advantage that you need:

  • delivering an outstanding pitch to prospective clients by preparing more thoroughly and communicating more innovative messages than your larger rivals
  • working longer and harder than more comfortable competitors
  • having the courage to ask family and friends for their time and support in getting your business up and running
  • needing to get creative in marketing your products because you can’t rely on traditional (expensive) marketing channels
  • employing ‘guerrilla tactics’ by taking your business out into the streets, markets, fairs and local communities

Best of all, you’ll never forget the lessons that you learned whilst you were the underdog.

3. Lower Overheads

It’s pretty obvious, but large businesses are expensive to run. The larger you get, the more time and money has to be invested to keep the business going.

Yes, small businesses have overheads too, but if you can start off in your home and find inexpensive ways of getting things done then you’ll have a significant advantage over larger rivals who have to concern themselves with HR, utilities, rent, software licensing, hardware, legal and accounting fees etc. Your family and friends might not have the money or resources to help you start your business, but they might have a shed or garage you can borrow.

4. Less Time Pressure

This doesn’t apply to every small business – some of you will have received angel investment and are feeling the pressure to get a move on – but generally speaking there is no obligation to grow quickly.

If you’ve started off in your home and are working evenings/weekends then you can’t sustain that forever, but equally you don’t have to be profitable by month 3. You can work out what’s going to work for you in the long run. You can make the right decisions before it’s too late to reverse things. You can ride out the seasonal peaks and troughs and work out when your business is going to make money.

5. The Personal Touch

One of the great pleasures of doing business with a smaller trader is that there is often a personal touch which big businesses lack. We’ve said it before, but this is a huge advantage, and you shouldn’t shy away from the fact that you’re small. It’s likely that your customers will love it – and tell others about their experience.

What are some of the practical ways in which this is an advantage? Well, your customer service should be pretty damn extraordinary because every customer will matter to you. Your marketing should be pretty compelling because you’re the embodiment of the business. And, perhaps most powerfully of all, you are the antithesis of the corrupt corporation.

6. Commercial Freedom

Many of us start new businesses because we’ve been unhappy in previous roles and we want to do things differently. A similar advantage of being a small business is that you have commercial freedom.

What does this look like? It means that you can run your business in the way that makes you happy. You get to decide the values that matter to you. You can choose to run at a loss or reinvest profits, to keep things small or go for rapid growth. Want to pour your heart and soul into the business for several months and then go traveling? You can. Having commercial freedom means that in the long run you’ll be happier and create a more sustainable – and successful – business.

7. You’re in the Majority

Small business make up 99.7% of US employer firms. You’re not alone. Far from it. There are far more resources and support groups for small businesses than large corporations.

8. No Bureaucracy

Many of us have experienced the frustrations that are an inherent part of working for a larger company. We have a great idea, our line manager and colleagues agree that it’s a goer, we submit the proposal to marketing or finance….. and…. they shut it down.

One of the most powerful emotional advantages of being a small business is that without bureaucracy you have the freedom to implement changes as and when you want to. This doesn’t mean that you should be reckless, but it does make your business that much more likely to adapt to market conditions.

9. Working With Friends

Many of us dream about working with our closest friends. In a small business you get to choose who you work with. Whether you’re going into business together, or simply drawing upon the skills and experience of your friends and family, spending time with the people that you love is a great advantage of being part of a small business.

One of the potential weaknesses of entrepreneurs is that they just don’t have a wide enough skill set to run a small business. By getting your friends involved – the artist, web designer, accountant, salesperson etc – you’ll help to mitigate against this weakness.

10. The Opportunity to Experiment

Many of the best businesses succeed because of their ability and willingness to experiment. In larger businesses there can be an aversion to experimentation – in the mistaken belief that this could threaten the very thing that has made the business successful in the past.

Amazon founder Jeff Bezos is a great example of someone who knows the value of experimenting. Your business might look small and vulnerable, but if it gives you the opportunity to experiment then this is a huge strength.

11. The Chance to Offer Genuine Expertise

A lot of large retailers stock a huge range of products. This is great, because the more products you have the more that you can sell. However, this creates an obvious blind spot. It’s hard to offer expertise when you sell a wide range of products.

We’re seeing more and more online businesses selling a very limited range of products. This might seem like a disadvantage, but in reality it means that you know that product inside-out. You’ve sold it numerous times. You know the strengths and weaknesses of the product and will probably suss out how to improve it over time. Best of all, your customers will perceive that you really do know what you’re talking about, which in sales is a huge advantage that you just can’t fake.

12. Ecommerce is a Small Business Gift

We’re biased, of course, but Ecommerce has radically transformed the retail playing field. It’s perfectly possible to set up a hosted store using a professional theme with great product photography for just a few dollars a month. Yes, you’re going to have to work seriously hard to compete with larger stores – we’ve all experienced the frustration of starting out with SEO, for example – but the opportunities are very much out there.

Advantages of Being a Large Business

13. Technology has Leveled the Playing Field

The last 15 years have opened up a whole new world of opportunity for small businesses, and they have also leveled the playing field. The reality is that small businesses and large businesses essentially use the same tools and strategies. You can set up social accounts and have multiple websites and landing pages – just like large retailers. You can outsource different areas of your business such as marketing, accounting, dropshipping or delivery – just like large retailers.

14. Financial Flexibility

It’s always been possible to start a business without stacks of cash (or a hefty bank loan) but it’s never been easier. There are plenty of new businesses who are still reliant on traditional methods of raising capital. However, the beauty of being small is that you don’t necessarily have to be. It’s perfectly possible to start a business without any capital. If you’ve got friends and family members who are passionate about your business they may wish to help out. You might even be able to crowdsource the funds that you need – particularly if you’ve already managed to create a following for your product. These methods are much more sustainable, unlikely to attract hefty interest payments and help you to build your business from a solid foundation – without having to worry about keeping the bank happy.

15. Greater Support

There’s nothing like a corporate scandal to remind us how hard it is to be a big business and retain your popularity. The Volkswagen emissions scandal is another great reminder of this.

Being a small business, by contrast, has never been cooler. It’s much easier to gather support as a small business because people tend to warm to you much easier than they do traditional, large businesses. In addition to your family, friends, colleagues and other acquaintances there are loads of ways to build a following as a small business. There are local tweetups, business owner events, online forums, markets, sponsorship opportunities etc that will help you to connect with like-minded people and get your business on the map. Large businesses won’t be threatened by you, and other small businesses will see you as a potential friend.

16. Streamlined Infrastructure

We often think that big businesses have it easy because they benefit from economies of scale. They do, it’s true. However, as a small business there are all sorts of complexities that you don’t have to worry about – premises, HR, IT, maternity leave, professional fees etc – that can cause big companies to become bulky and inefficient.

17. The Government Are On Your Side

Governments want local business to succeed. It’s as simple as that.

In the UK there are a range of grants, loans and resources available to businesses of all shapes and sizes. Some of the best apply only to small businesses. If you’re in an area of deprivation or low employment then there might be regional funding available. You could take on an apprentice or find yourself a mentor. Exactly the same principles apply to our friends in the US.

18. Small is Beautiful

Small businesses can often feel like the plain sibling living in the shadow of leading brands. The reality, however, is that small businesses have the potential to be much more beautiful.

There is an intrinsic beauty to small businesses. We tend to find that customers take a real interest in the stories behind the stores that they shop from. It’s incredibly rewarding starting small and growing a business over time – from the thrill of the first sale to launching a new product and employing your first member of staff – that customers really appreciate.

One of the great pitfalls that often accompanies size is that corporate giants can be pretty ugly. It’s much harder to control your reputation when you’re a household name operating internationally with hundreds or even thousands of staff. When it was discovered that GoDaddy CEO Bob Parsons had shot an elephant whilst on holiday in Zimbabwe the company lost 70,000 domains in a week. That’s a pretty bad week by anybody’s standards. Small businesses tend not to be so vulnerable, and negative publicity can be more easily controlled.

If you’re feeling like the poor relation, don’t. Small businesses are beautiful.

19. More Fingers in More Pies

In a small business you are the biggest asset. You are the primary vision carrier. It’s your passion, skill and determination that is going to keep standards high and drive the business forward. It’s therefore a huge advantage for you to be involved in as many different areas of your business as you possibly can.

This simply isn’t possible in large businesses. The leaders of the business are multiple steps removed from the customers. However, in a small business you’ll be interacting daily with staff, suppliers and customers, helping to ensure that each of these key relationships is running smoothly and achieving the right results.

20. You Can Be More Efficient

We’ve already explained that small business can be streamlined. You can also be much more efficient than large companies – even though people expect it to be the other way round. A great example of this is software. Where large companies pay huge licensing fees, you can take advantage of free versions.

21. You Can Compete on Price

This is slightly contentious, but we’ll work on the basis that you’re starting up a business in your spare time. If this is the case, you actually have more freedom to compete on price than much larger businesses.

Now we know that you have to put food on the table. But let’s assume for a minute that you’ve got a long-term plan and you’re not wholly dependent upon the income that your online business creates. You have the freedom to charge low rates and cut your margins back to the bone in order to get your business up and running. This will help you find customers, hone your product and learn what it’s going to take to become a successful retailer. Alternatively you can set your price high to make sure that you’re making the best use of your time – particularly if you’re selling a craft product. Why sell 10 products at $100 dollars each when you can sell 5 at $250 each – generating greater returns and expending less effort.

Large businesses don’t have this freedom. They have targets to meet and shareholders to pay dividends to. You don’t.

22. You Can Drop Everything

Many people start online businesses because they want greater control over their time. This is a huge lifestyle advantage. You can pick up the kids, see a family member who’s in town for the day and work at the times that suit you.

However, there’s another advantage to being a small business that we don’t always think of. Because you’re able to drop everything, you can respond to positive opportunities in a way that bigger businesses often can’t. If a customer has come back with a reputation-threatening complaint then you can drop everything to resolve the issue. Equally, you can meet a key supplier, attend a business event or step in at the last minute to attend a Christmas fair.

23. It’s Easier to Identify and Work On Your Weaknesses

Some of the biggest retail failures of our generation – think Woolworths, HMV, Jessops etc – were also some of the biggest surprises. A decade before their extinction these companies looked like untouchable retail giants. The danger with size is that it often brings the illusion of security.

Small business, by contrast, know that they have a lot to work on. Being small helps to expose our weaknesses and confront the things that we need to change. Yes, lots of small businesses fail to do this, but it’s fundamentally easier when it’s blindingly obvious what your weaknesses are.

24. History is On Your Side

There was a time when every household name business was a small business. There are simply too many examples to name. From Dunkin Donuts to Yo Shushi to GoPro, small businesses continue to defy expectations and change the marketplace that once existed perfectly happily without them.

Empires rise and empires fall. What has your business got to lose?

25. Creating a Family Culture

Lots of big companies are currently trying to redefine their culture. They want to create a feeling of family, togetherness and closeness among individual teams.

In small businesses we don’t have to try. We work with our friends, our families and our children. We do business in our homes and our streets. Small businesses create a family culture that big businesses spend millions trying to achieve.

26. If All Else Fails, Rip it Up and Start Over

We’re starting to see more and more serial entrepreneurs who start businesses, achieve a measure of success, rip it up and start all over again. Why? Because running a small business is one of the best ways to learn how to run a successful business. Big companies have shareholders, financing, debt, premises and staff. They don’t have this luxury. If you’re running a small business you have the freedom to shut everything down, take what you’ve learned and start over.

Written by EcommerceRVW
EcommerceRVW is a dedicated Ecommerce Blog bringing you regular ecommerce articles, reviews, case studies and guides. We're passionate about helping ambitious store owners take their business to the next level.