123 Reg logo Blog

Why big isn’t necessarily better in business

By Tim Fuell - May 8, 2014

You’ve got a successful start-up. You’re making some nice money, but you still think it could be more. Just because your company is successful as an SME it doesn’t necessarily mean it could be as successful or even replicate some of the success on a grander scale. Turning a start-up into a big business may be the ultimate dream for a driven entrepreneur but is it actually the best thing for your business and is it the best thing for you? Here’s a just handful of reasons why staying small may be the best option for your business:

Keep it simple

It’s the old adage that sweeps through everything in business. Whether it is your marketing, your company structure or what your business does, keeping it simple is often the best route to success. Keeping small helps you retain that simplicity and certainly avoids the complexities that being a bigger business can bring, where often keeping it simple isn’t an option – or at least an efficient option. The more people, the more products, the more customers you have, then the less simple your business can remain. If your company has thrived on its simplicity, take a second to wonder if that is fundamental to its core and whether growth could actually be a threat to that.

Loss of control

If you’ve built a business from scratch, you will feel like you are very much part of it and it is very much part of you. Even the most grown-up of grown-ups can’t avoid just a tinge of ‘what-if’ when they see an old flame with a new beau, so what about seeing your company being driven by another? To grow you probably need some external investor and if an investor comes in they will be looking to get return on investment not necessarily match your founding vision. Keep in mind even if you retain control, the more you are beholden to others, the more your vision will become obscured.

Customer relations

Although big businesses invest millions every year into customer service, its still never as good as the close relationships you build with your customers when you are small. Many prefer that personal touch and you may lose some of your best clients if you grow too big. As a bigger business you will also begin to attract a different type of customer too. Sometimes demanding in different ways and your business may not be set-up correctly to deal with them and keep relationships strong and growing.

Profit can be harder to come by

Image courtesy of Stuart Miles  FreeDigitalPhotos.net

Image courtesy of Stuart Miles FreeDigitalPhotos.net

As a small business, operating perhaps from home or in the virtual world, you can keep your overheads relatively low. Grow and there is almost certainly a need for premises, employees, long-term commitments, etc. Each comes at a cost and many with a series of supplementary costs too, usually in terms of additional administration etc. This squashes your profit margins and often, as a result, drives the need for further growth which can see you over do it in search for success.

Is your business even scalable?

Many small businesses work because of their niche or boutique approach to the needs of customers they are servicing. Have a think, if it was that easy to do it on a large scale would the big conglomerates not already be doing it? Very often there are ceilings to the number of customers or amount of revenue a certain sector can sustain. There may not be widespread appeal and even if there is, rarely is it at the same margins or growth rate as you will have experienced as a small business. Can that business then transfer to a bigger scale and remain sustainable over a long period?

If your business is a passion, the chances are getting too big as a business will challenge that and you even more than you can ever imagine. The transition from small to big is often the killer blow for businesses, who perhaps grow too fast or lose their core focus. The skills and tricks required to run a bigger business are different from those of a small business. If you are successful a running small businesses it may be your mindset is better matched to that style of business, so instead of growing out think about starting another company alongside your existing one – perhaps even a partner firm that can share some of the success of your first.