There are many areas of life where the mantra “bigger is better” rings true, but this is not always the case when it comes to your small business. While it’s true that most people start businesses with the intent of growing them, the size or speed of this growth may not be the ultimate measure of success. Becoming too large or expanding too fast can create unexpected challenges, while keeping your business small often has unexpected advantages.
There is evidence to support the fact that staying small is a legitimate business trend. According to a study by University of Chicago professors Erik Hurst and Benjamin Pugsley, many business owners start out small, stay small, and are very happy that way. One of the reasons these satisfied entrepreneurs site most often is quality over quantity, or specifically choosing quality of life over “quantity” of profit.
If turning your small business into a billion-dollar enterprise is alluring, keep in mind that setting up your company for success will require more staff, resources, and systems, as well as a solid plan for managing your growth strategically. If your business plan is centered on staying small, the benefits may outweigh being the biggest business on the block.
The smaller you are, the less infrastructure and resources you will need. Staying small in terms of both size and scope of work keeps the cost of doing business low, allowing you to spend less on inventory, staff, rent for a large workspace, and/or expensive equipment or software. Your business may generate higher profits more rapidly thanks to lower overhead and expenses.
Agility is one of the biggest advantages small businesses have over larger competitors. Without the layers of management often found at a larger company, small business owners can shift gears, change direction, fix problems and, if necessary, eliminate processes or programs altogether without engaging in a long, drawn out process. Staying small affords you opportunities for flexibility with everything from your hours and marketing approach to keeping up with changes in your industry.
Risk is inherent in running a business of any size, but staying small may make it easier for you to manage the risk. In smaller businesses, it often takes less time, energy, and money to invest in a new product, service, or initiative. If things don’t pan out, you can course correct quickly and bounce back faster than a large company that has made a more substantial investment.
Fewer chefs in the kitchen can get a meal on the table faster. Eliminating the levels of bureaucracy found in large corporations allows owners of smaller businesses and their leadership teams to stay close to the action. The result: faster decision-making, streamlined processes, and quick results.
Lower start-up and overhead costs combined with quick turnaround times could enable you to generate a profit faster than a larger corporation. While it may not be millions of dollars, your share of the pie is likely to be bigger because your expenses are limited and the profit is split among fewer people. Keep in mind that before you start taking a paycheck, you will need to factor in expenses and pay your employees as well as make sure your business retains enough of its profits to continue growing and operating efficiently.
Access to Credit
Small businesses like to partner with other small businesses. When big banks aren’t interested in providing loans, a small business like Summit Financial Resources is a reliable source for the working capital you need to grow. We’re not regulated like a bank, which means we take more risks and structure more flexible deals than banks and other commercial finance sources can provide. Like you, we have fewer layers of management to go through so we can make decisions quickly and roll with the punches. Our customers are like family, and we work hand-in-hand with you to help you weather tough times, take advantage of opportunities, and be the business you want to be.
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Small businesses can fine-tune their focus and target their products and services to a well-defined segment of the market. Selling to your sweet spot allows you to provide high quality products that command premium prices. You can remain faithful to your core business values and carve out a niche that no larger company can touch.
In addition to laser-targeting their offerings to their customers, small businesses can offer an unrivalled level of personalized service, developing strong customer relationships, generating repeat business, and building trust. Everyone wants to be heard and feel special, and being small allows you to take your clients’ needs into consideration, quickly implement changes to meet demand, and go above and beyond when it comes to service.
Staying small does not mean you stop growing. Creative small business owners look for opportunities to add income streams without increasing the complexity of their operations. This could mean taking your brick and mortar store online, beefing up your social media advertising to boost sales, or setting up pop-up shops at community events. If your online business or service lacks a convenient physical space, consider partnering with a local business to make your services or products more accessible.
There are pros and cons to running businesses of all sizes, but staying small allows you to stay in control and have the freedom to build relationships and your business on your own terms.
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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.