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Why would a business want to stay small?

Small businesses provide opportunities for entrepreneurs, jobs for neighbours and gathering places for communities. They’re rooted in the landscape where they grow, and they give back vitality and sustenance. Although running a small business involves taking greater risks than working for a large, established company, the rewards are both quantitative and qualitative, including broad-based prosperity and a web of symbiotic relationships.

Although the thought of turning a small startup into the next billion-dollar enterprise may seem alluring, bigger isn’t always better. Growing a business too quickly can often bring about unexpected obstacles and challenges you may not be prepared for. In many cases, keeping your business small makes the most sense and comes with several distinct benefits.

A company has to grow in order to be successful. But growth changes, and change is never easy. Growth is an intensive process; a discipline focused around improvements. A business that grows can improve its processes, people, and products. To build a business requires different things at different times. It is an evolution that most companies can never experience.

Why do small businesses fail to grow?

One of the main reasons a business fails to grow is the lack of capital. If you don’t have sufficient capital to invest, your company will either fail to grow or grow at a snail’s pace. Of course, there are other reasons, such as bad management, bad business model, poor marketing, and many more.

What happens when a business doesn’t grow?

Some say, “a business that isn’t growing is a dying business.” Sadly, that is true—most of the time, businesses that fail to grow bleed from multiple wounds.  If your business stopped growing, your business might have changed, your customers might have different needs, or the market place might have changed.

Why would a business stop grow?

You might have changed your product without consulting your customers. You assumed that your customer would want the new product. When you brought the new product to the market, you realized that people don’t want it. Ouch. This happens often. Businesses create what they think will sell, not what customers want to buy.

It is also possible that you haven’t changed your product, and people don’t want to buy it anymore. The product might be outdated or out of style. The bottom line is that the market has no demand for what you are selling.

 

Sometimes businesses can’t grow because of macroeconomic factors. The country might be going through a recession, and your business could suffer.

Why would a business never grow?

There is a huge difference between a business that stopped growing and a business that never took off. If a business never grew, it is possible that it never sold anything the market wanted to buy. Businesses that succeed realize this early and change. They work with their customers and develop products that sell. Unfortunately, most businesses that fail to grow never understand why people didn’t want to by what they had to sell.

Benefits of Keeping Your Business Small

Fewer HR Headaches

The more employees you have, the more laws and regulations you have to contend with. Whether it’s ensuring that your business is keeping up with OSHA standards or you’re fulfilling your tax obligations, things can get ugly in a hurry from an HR standpoint.

Think of it like this. Would you be better able to stay on top of HR if you had five full-time employees or 20? Keeping your business lean means you can keep it running smoothly while minimizing any HR nightmares.

Less Overhead

Small businesses have fewer moving parts than larger companies. They’re likely to have less equipment, smaller facilities, lower utilities, less maintenance and so on. This is beneficial for two main reasons.

First, there’s much less you have to deal with to keep your business running. This translates into fewer extraneous tasks so that you can focus more on core functions. Second, it’s significantly easier to manage, and you’re less likely to find yourself in over your head.

More Flexibility

Agility and adaptability are two characteristics of the most successful businesses in the 21st century. With change occurring at such a rapid rate, it’s arguably never been more important to react swiftly to market developments and tweak your business accordingly.

If you’ve got a large company with numerous stakeholders, it can be difficult to get everyone on the same page and react to shifting conditions. But by keeping your business small, it’s fairly easy to switch gears and implement the necessary changes.

Quality Control

One of the most common problems that businesses who grow too quickly encounter is upholding quality standards. Often when there’s too much of an emphasis placed on output, quality can ultimately suffer. This is problematic for obvious reasons and will often negate the impact of any growth that has occurred.

“Staying in the shallows” can be advantageous because you can keep a closer eye on quality levels and ensure that you’re consistently meeting consumer expectations. In turn, this should help you remain competitive, while at the same time reducing your stress.

Higher Profit Margins

While small business is unlikely to generate as much revenue as a larger one, many times, it will have higher profit margins. This goes back to our second point about having lower overhead costs and fewer operating expenses in general. By keeping things small-scale, you can keep your company profitable and increase its sustainability.

While a small, tightly ran business may not be as glamorous as building a megalithic corporation featured on Forbes 500, it does have some convincing advantages. That’s why keeping your business small maybe your best option.

Lower overhead

The smaller you are, the fewer expenses, space and resources you need. Staying small, in both team size and scope of work, allows you to put more money back into your business instead of spending it on things like monthly rent for a large workspace and/or expensive equipment or software used by a big team.

By staying small, your overall cost of doing business will stay down as profits increase – win-win!

Strategic flexibility

One of the smaller companies’ greatest strengths against larger businesses is that they’re quick and agile.

While a large business will take time to change directions, develop new offerings or wade through the paperwork and approvals required to start a new partnership, smaller companies have the advantage of approving decisions and changes more quickly, changing process and production, and trying new things on a smaller scale.

If something doesn’t work, they can fix it, change it or cut it without it being a long, drawn-out process.

While a big company may pull a lot of weight and have the money to back it up, a smaller company can be quicker to the draw and bring in higher profits more rapidly thanks to lower overhead and expenses.

Less risk

Of course, there’s always a risk in business, but staying small helps you manage the risk in more controlled doses. In smaller businesses, you only have to answer to yourself, and it often takes less time, energy and money investing in new ventures.

If for some reason, those ventures don’t work out, you’re able to bounce back quickly thanks to the lower initial investment and risk compared to a larger business.

Faster profits

However, if taking that risk does pay off, then fewer startup costs, low overhead, quick turnaround times and fewer employees mean you can turn a profit quicker than in a larger corporation.

Sure, you may not be making as many millions in profit as bigger biz. Still, the money you are making is divided among fewer expenses and salaries, meaning you get a greater portion of the cut.

Staying small also means that, as the founder, you continue to have a large stake in the company.

Quicker results

There’s less bureaucracy in smaller companies and, with fewer people, the owners and founders are closer to the action resulting in quicker decision-making, streamlined process and faster results.

Simply put – you can get stuff done!

Personal service

A smaller company can more easily tailor-fit their service and offerings to their client, creating stronger ties, trust and repeat customers.

Everyone wants to feel like they’re special and being listened to. When you’re smaller, you can consider your clients’ needs and quickly implement changes to your business or products that better serve their requests.

Additionally, your team is more likely to feel involved, engaged and connected to the business when each individual has a higher level of responsibility and stake in it.

Location, location, location

Larger companies are often limited to where they can be located both in terms of space and having to be in a location where their employees can get to.

If you’re running a company with hundreds of employees, chances are you’ll need to be in a centralized area, but if you stick with a small team, you can set up shop pretty much wherever you want which means you have more control over where you live.

Freedom

Running your own business certainly isn’t easy and in the end, will probably take up more of your time than if you stayed working for someone else, but with that increased responsibility and control also comes a higher level of freedom – freedom to live where you want, freedom to do what you want, freedom to pop out of the office and catch your child’s baseball game whenever you need, and the freedom to create the lifestyle and relationships you want.

As with anything, there are pros and cons to running your biz, but staying small allows you to stay in control and have the freedom of living and working on your terms.

Small Business Help

You can keep doing what you love!

As a company grows and changes, so does the role of its founder… and sometimes not in the way, you would like it to. When more projects and people are added to the team, the founder can often become more distanced from the actual workings of the company as they move toward a higher-level management role.

On the other hand, in a small business the founder can stay closely connected with the company’s work and keep doing what, presumably, they set out to do in the first place by starting the company.

Advantages of Small-Business Ownership

Independence.

Entrepreneurs are their bosses. They make the decisions. They choose whom to do business with and what work they will do. They decide what hours to work, as well as what to pay and whether to take vacations. For many entrepreneurs, the freedom to control their destiny is enough to outweigh the potential risks.

Financial gain.

Entrepreneurship offers a greater possibility of achieving significant financial rewards than working for someone else. Owning your own business removes the income restraint that exists in being someone else’s employee. Many entrepreneurs are inspired by the mega-millionaire entrepreneurs we see today, such as Steve Jobs, Elon Musk, Jeff Bezos, and Mark Zuckerberg.

Control.

It enables one to be involved in the total operation of the business, from concept to design to creation, from sales to business operations to customer response. This ability to be immersed in the business is very satisfying to entrepreneurs who are driven by passion and creativity and possess a “vision” of what they aim to achieve. This level of involvement allows the business owner to create something of their truth.

Prestige.

It offers the status of being the person in charge. Some entrepreneurs are attracted to the idea of being the boss. Besides, though, there is the prestige and pride of ownership. When someone asks, “Who did this?” the entrepreneur can answer, “I did.”

Equity.

It gives an individual the opportunity to build equity, which can be kept, sold, or passed on to the next generation. It’s not uncommon for entrepreneurs to own multiple businesses throughout their life. They establish a company, run it for a while, and later sell it to someone else. The income from this sale can then be used to finance the next venture. If they’re not interested in selling the business, the goal may be to build something that can be passed down to their children to help ensure their financial future. One thing is sure: In order to fully reap the financial benefits of a business venture, you need to be the owner.

Opportunity.

Entrepreneurship creates an opportunity for a person to make a contribution. Most new entrepreneurs help the local economy. A few—through their innovations—contribute to society as a whole.

Besides, small businesses have certain advantages over large businesses. Flexibility, generally lean staffing, and the ability to develop close relationships with customers are among the key benefits of small businesses. The digital communication revolution has significantly lowered the cost of reaching customers, and this has been a boon to small startups and big businesses alike.

Disadvantages of Small-Business Ownership

As the little boy said when he got off his first roller-coaster ride, “I like the ups but not the downs!” Here are some of the downsides to owning a small business:

Time commitment.

When someone opens a small business, it’s likely, at least in the beginning, that they will have few employees. This leaves all of the duties and responsibilities to the owner. Small-business owners report working more than eighty hours a week handling everything from purchasing to banking to advertising. This time commitment can place a strain on family and friends and add to the stress of launching a new business venture.

Risk.

Even if the business has been structured to minimize the risk and liability to the owner, the risk can’t be eliminated. For instance, if an individual leaves a secure job to follow an entrepreneurial dream and the business fails, this financial setback can be hard to overcome. Beyond financial risk, entrepreneurs need to consider the risk from product liability, employee disagreements, and regulatory requirements.

Uncertainty.

Even though the business may be successful at the start, external factors such as downturns in the economy, new competitors entering the marketplace, or shifts in consumer demand may stall the businesses growth. Even entrepreneurs who go through a comprehensive planning process will never be able to anticipate all of the potential changes in the business environment.

Financial commitment.

Even the smallest of business ventures requires a certain amount of capital to start. For many people starting small businesses, their initial source of funding is personal savings, investments, or retirement funds. Committing these types of funds to a business venture makes them unavailable for personal or family needs. In most cases where a small business receives startup funding through a loan, the entrepreneur must secure the loan by pledging personal assets, such as a home. Risking the equity in one’s home is a financial commitment, not all entrepreneurs are willing to make.

Reasons Why Small Businesses are Important

Small businesses are important because they provide opportunities for entrepreneurs and create meaningful jobs with greater job satisfaction than positions with larger, traditional companies. They foster local economies, keeping money close to home and supporting neighbourhoods and communities.

Independence and Autonomy

Although small-business ownership is a longstanding and traditional way of earning a living, it bucks an ongoing trend of large companies consolidating, building economies of scale and spreading homogeneity. A chain restaurant in the Midwest will be virtually the same as a version of the same restaurant on the East or West coast, and a pharmacy with locations across the country will reflect the same values, wherever it is located, whether it focuses on convenient delivery of pharmaceuticals or processed convenience foods. In contrast, independently owned restaurants and pharmacies reflect the culture and needs of their neighbourhoods. Local restaurants feature regional specialties, and local pharmacies may supplement their stock of pharmaceuticals with anything from jigsaw puzzles to t-shirts from area Little League teams.

Creating Meaningful Jobs

Small businesses create two out of three new net private-sector jobs. That figure refers to the number of new jobs created after subtracting the number of jobs that have been eliminated. This trend has been reasonably consistent for 25 years and has continued since the end of the Great Recession. Not only do small businesses create a significant percentage of new jobs, but the jobs they create provide high levels of job satisfaction.

It’s easier to take pride in your work and to feel as if your contributions make a real difference when you have a direct relationship with your boss than when your company is owned by millions of shareholders, who live all over the world. Executives run the business in a distant city.

Small businesses are integral parts of local economies, helping to create webs of financial interdependence that foster broad-based prosperity. When you spend money at a privately owned local store, that money goes to pay a worker in your neighbourhood, who, in turn, is likely to spend money at another neighbourhood business. The more that small businesses leverage their potential to support each other, the greater their capacity to create a thriving local business community.

This mutual support is also useful during hard times. If a local business is struggling, community members can bond together to help the struggling business get back on its feet through crowd-funding campaigns or old-fashioned word of mouth pleas. It isn’t easy to imagine a large corporation generating this type of energy and support.

 

 

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