SMALLER, QUICKER AND SLICKER

Many smaller businesses believe that their larger competitors have an inevitable advantage. But with smart management, this doesn’t have to be true.

Of course, large organisations do often have many advantages. By definition, they usually have far greater resources, more purchasing power, wider market coverage and much deeper pockets. But what is often not recognised is that they can have many inherent weaknesses too.

The secret of success for smaller businesses is to ignore any sense of inferiority and to accentuate the positive, to play to their strengths, capitalise on larger organisations’ weaknesses and learn from others.

Seizing Smaller-Company Advantages

Well-run smaller companies have many advantages over larger ones.

For example, they can benefit from:

  1. Short communication chains: if something happens today, the boss will probably know about it today;
  2. Quick decision-making: decisions don’t need to go up a long line of command, to involve others who may have many competing issues for their attention;
  3. Slick action: fewer initiatives need to be presented to management committees and boards, nor formally budgeted for first;
  4. Customer-focus: head honchos in smaller companies tend to know more of their principal clients at operational level personally, so can be far more responsive to them;
  5. Highly profitable, specialist ‘niche’ sectors - which larger organisations might either not spot or consider too small;
  6. Flexibility: with less bureaucracy, yesterday’s plans can readily be changed if today’s circumstances require this;
  7. Entrepreneurial spirit: a greater tolerance for risk in seizing new opportunities; and also,
  8. Concentration: successful smaller businesses may be much more wary of unproductive diversionary activities (not the least because they may rarely afford them);
  9. Attention to detail: the impact of ‘small’ issues on the business are far more apparent, more quickly, at a much more senior level;
  10. ‘Doing more with less’ – not just with ‘tighter’ overheads, but more productive overheads;
  11. Less waste: not least because every penny spent is more visible to the owners;
  12. Tighter staff supervision: it is often far easier to get away with poor performance in a large organisation, not least because disciplinary procedures tend to be more cumbersome and protracted;
  13. Greater team contribution, not least because most employees see the whole business process and may therefore contribute more at any level;
  14. Greater sense of team achievement: small gains may be much more likely appreciated and rewarded by managers – and acknowledged by peers;
  15. Even greater dedication: for many owner-managers, their business is their livelihood – with few other options.

Defending Smaller-Company Disadvantages

For small companies to capitalise on these advantages, they must also guard against some inherent weaknesses. But they can learn from and copy much of what larger organisations tend to do well.

  1. Planning:
    Larger companies tend to plan much more strategically and further ahead. Planning need not be a bureaucratic exercise, but it does require sound market awareness, broad vision and a flexible, iterative process. If strategic planning is not your strength, the requisite skills can readily be obtained from a trusted external adviser or Non-Executive Director.
  2. Raising Funds
    Raising finance for small businesses can be much harder than for larger ones. But in any business, you need a rigorous, compelling plan to show where the investment will be made, productively and prudently, and competent management that will report accurately and promptly. Not so difficult?
  3. Market Coverage and Intelligence
    Significant market share brings many advantages, of scale, visibility, information and influence. Big companies may seek this globally. The secret for a small one is to build selective market share, in their chosen patch, however that may be tightly defined.
  4. Staff Competencies
    Successful organisations of any size identify the skills and behaviours they need so they can recruit, train and develop them. Large companies tend to do this better than smaller ones, not because they have ‘cash to burn’ (as some wrongly think) but because they know it makes sound business sense. It does for smaller businesses too!
  5. ‘Professionalism’
    Big, successful organisations have a reputation for ‘professional management’. So also can small ones! Don’t ever let size be the determinator of this? It is surely a very weak excuse for a business of any size to say it can’t afford to be more professional!

SIZE ISN’T EVERYTHING!

If you have ever worked for a large organisation, you will know at first hand it can be much harder to run a huge conglomerate, with staff, customers and suppliers you may not know well, often with fickle and demanding external shareholders.

Some of the most profitable businesses I know are small ones, in all sorts of fields, with net profitability consistently in excess of 30% on sales. (Their challenge is to maintain this as they grow!)

So think big?

But act small!

By Jeremy Thorn

Jeremy Thorn is the founding President of QED Consulting, a qualified Executive Leadership Coach and also Non-Executive Director of several fast-growing businesses.
He is also the author of several prize-winning business books and a frequent speaker on management topics internationally.