Why do some businesses remain small?

We are living in era of constant grow and expansion. While some businesses fight to beat two digits growth rates every year, other businesses may, stay small or are growing very slowly. In this article we will cover why do some businesses remain small. And if it is a bad idea.

Owner personal choice

The first obvious one reason for staying small is owner personal choice. Many owners choose to stay small, or to grow on smaller pace. In this era where everything need to grow fast, this may seem like crazy idea.

But for many owners this is a great choice. Constant expanding is resource heavy operation. From hiring new people, which you need to hire, train and build trust with them, to buying new equipment and spaces.

Owners who pick to grow slowly can be less stressed. They can still have control over the quality of their product or service. When their product/service is better, they don’t need to rush to eat the whole market.

Nowhere to grow – Small market size

Some owners may want to go big, but there is no space for that. When you are for example running your local store, there can be no place for another shop in your area. There can be not enough customers or high offers of the same product/service. Opening another shop 100 miles away from your location won’t be profitable, so you remain small.

But this isn’t a bad thing! You can stay small, build relationships with your clients and establish your brand well. Maybe there will be an opportunity to grow in the future when something happens. When your competitor retires or starts to offer worster services. There is no need to rush for constant expansion. Constant expansion may not end well for you.

High cost of growth – High expansion costs

As mentioned above, when your new shop will be located far away from your location, there will be new costs. There will be a need for transportation. Maybe you need to hire a new driver and buy a new car. You need to find employees in another city and arrange that shop. This process can be more costly than your best-expected profit can be. So you end up not growing. And that’s completely fine.

Bootstrapping over borrowing

Every business needs money to grow. Borrowing money can be an option when starting, and even when expanding. But can you start or expand without borrowing? This technique is called bootsrapping.

You make your new investment without borrowing, only with money that you end up making. This way you can stay in your business alone, without any banks or investors. This technique is great, but when you find gold and you don’t have money to buy drilling machine, you can end up diging by hand for many more years before you can end up earning enough to buy tools that you need to be more productive. And your competition may start their business with borrowing money for drilling rig. Remember that.

Quality control

When your business is small, you are pretty much in charge of everything. You can see problems with quality of your product or service right away. When you own 10 shops at 10 different location it’s much more difficult to find a problems. Staying small can be great decition to increase quality.

Quicker results

When you need to reeducate thousands of employees to new technique of making coffee you may end up doing it for months. Many big companies are called colossus for reason. There are clumsily, slow and hard to run. When you stay small you can make changes 10 or 100 times quicker than your big competitors. This is big advantage over staying small.

Individual services

Big companies tend to have good services, but the smaller ones can be more individual towards their clients. This can lead to building stronger relationships with your clients. If you can help them to solve issue which is not exactly your core business but it’s still profitable to you, go on. Bigger companies will probably refuse to do this job. Because it is not their core business.

Conclusion:

So, Why do some businesses remain small? Firstly, they can provide betters services and control their quality. Secondly, they can adapt more quickly than their bigger competitors. Thirdly, choosing to stay small can be live improving decision for owners. They don’t need to stress out about borrowed money and investors.

Running your own business can be hard. We know that because we are running it for some years now. We build are small business financial tool to help improve life in our small company. If you are interested, try it for free.