Although developing your business is important to ensure growing profits, expansion is a long-term financial commitment. Meanwhile, there are many advantages to being a small or medium-sized business – taking advantage of these by carefully planning and managing your business is the key to maximizing productivity and profitability.
- Advantage in the labour market
- Closeness to your market
During a time of cost-cutting, recession and outsourcing, many employees worry about their job security. Working for a smaller business means increased job security and therefore, increased employee loyalty. Working for a small or mid-sized organization also means more individual responsibility and challenge – roles are more varied and result in greater employee satisfaction. You can use this advantage in the labour market to attract better employees whilst retaining those that you already have.
To stay ahead of your competitors you should conform to market demands and utilise emerging technologies as well as market trends. It is important for you to invest some time and money into innovation. However, large businesses often need to go through a complex hierarchal system (including shareholders and investors) before they can change direction or invest in new technology. Smaller businesses are much more flexible and unrestrained – they can focus on long-term profitability rather than short-term earnings, and are able to invest into profitable ventures of the future.
It is often thought that the larger your market share, the more profitable your business. But this is not always true: as you market share grows, the more remote you become from that market. Smaller businesses are closer to their market, which means that they can identify and respond to market changes sooner and more effectively than their larger counterparts.