Top 5 Benefits and Top 5 Hazards of Being a Small Business

Having a small business is a challenge that anyone should be proud to tackle. Being small means that there are fewer people to do the necessary tasks, and potentially more work to do in reaching goals and pulling in customers and to make sales. A small business, by one definition, is “an independently owned and operated company that is limited in size and in revenue depending on the industry.” Although a small business often does not have the ideal scope and revenue, there are benefits to being small. You may have a strong, dynamic team, efficient communication, and more time spent on your core focus. Yes, your small business will face challenges, but with each obstacle comes reward! Here are the Top 5 benefits and hazards of being a small business!

Top 5 Benefits of Being a Small Business

5. Less Bureaucracy

With less red tape, more time can be spent on your business’s core competencies. Large companies inherently possess more red tape to ensure that processes and authority are being followed. You don’t need to worry about that with your small business because you are nimble, and this benefits you. Your team is able to make quick decisions together and concentrate on your key qualities. You can focus because there are less layers of paperwork and administration that distract from what each individual does best, thereby enhancing the business. Because your team is small, you do not have to spend time worrying about the hierarchy of employees and managing responsibilities between each layer of personnel. Not having these things to worry about cuts back on the things that take your focus off of your business (eg. time-consuming administrative work) and instead allows you to strengthen your team and goals!

4. Control Costs

You control your small business. That means that you have jurisdiction over the decisions, prices, and expenses that your business makes. You get to decide what and where to spend your money and can quickly make drawbacks when necessary. Large businesses struggle with this as when they become too big and often lose money as they increase overhead. They have no choice in the matter if they want to keep their business from going under. As a small business, to control costs, you can lower financial expenditures, limit employee spending, enhance your marketing, and use your time more wisely. You have the advantage of keeping your costs from ballooning out of control. You can be the business with the best prices while large businesses have more difficulty managing costs.

3. Better Communication

With being a small business comes less people. Less people means less effort to communicate with each team member. A small business does not know the struggle of trying to keep everyone in the loop, where larger companies have difficulty sending out a quick message. It is in large businesses that things get complicated, and the organization of larger messaging systems is crucial just to ensure efficient communication. Being a smaller group of individuals enables your team to stay on track with simple means, as there are less people to communicate with. E-mail, the cloud, and apps are all at your disposal as your business is small enough to fit within each system’s “limited-space” parameters. Your team’s communication can easily be on point, and sharing and exporting documents, ideas, and messages has never been simpler. A simple group text is often good enough to reach out to team members and convey an important message.

2. Business Culture

When a team is able to really connect and take the time to get to know each other, the business benefits. Being a small business allows closeness and a sense of community as there are fewer people on the team. One study found that businesses with happy employees will outperform the competition by 20%. In addition, each team member is involved and receives first-hand experience. This large investment into each team member will increase their skills, resulting in better customer engagement and employee retention. It is the times when you walk into a business and see a visibly bonded team (and skills to go with it) that you want to engage with that company more. The small team is viewed as a family, where the closeness and size begins to create a culture unique to the business and enjoyed by customers. Camaraderie translates to higher engagement and superior performance among employees. A stronger business culture equates to happier customers and better business.

1. You are a Nimble Ninja

You are a small business nimble ninja! Large businesses have the disadvantage of moving slowly, trying to adapt to the latest and greatest technology and trends. Not you! Your small business can react quickly to sudden changes in the market. Whether those are price changes, repositioning your offerings, or even changing your brand to turn potential crises into conquests, your small business is able to dominate at every turn that the society (or the economy) throws at you. Being small also affords the opportunity to take risks. Trying a new thing that would otherwise be an execution for larger businesses is accessible and exciting to you. A sudden trend in business could be the next big connection with new customers (eg. some small businesses used Pokémon Go to their advantage – drawing in customers to the Poké-stop and their product). If your new business idea fails, you have the ease and flexibility to quickly change it back. These risks you take could be just the thing to take your business to the next level.

Top 5 Hazards of Being a Small Business

5. Less Specialization

Small businesses, of course, have smaller teams. This usually means that each individual is expected to wear more than one hat in terms of skillset. For example, Suzie handles the social media, performs customer service duties, re-stocks, tracks funding, as well as plans team meetings. The problem with this is that an employee doing numerous tasks can easily get overwhelmed by the responsibilities at which they are not entirely competent. Instead of having one area of strength, small businesses are forced to have employees that cover many areas with only an adequate skillset. Time management and competency are therefore sacrificed to save costs, becoming a hazard to the business.

4. Problems Can Escalate

When a large business has a problem, they have the resources to approach the issue and smother it as efficiently as possible. Small businesses do not have the advantage of a large workforce and therefore small problems are more likely to become an escalated issue. Unpredictable income is one of the biggest problems facing small business. Because there is less money coming in than larger companies, small businesses can get hurt more due to the lack of revenue. This is especially a problem if cash flow has not been managed due to a missing a specialized bookkeeper to record incoming and outgoing cash. Those in small business have to take drastic measures to reduce spending and generate income, even cutting back on the owner’s pay.

3. No Economies of Scale

As a large business, there are benefits that come with the economies of scale. They receive a cost advantage simply because they produce more. Being a small business, you do not have the budget or ability to purchase large quantities, and therefore do not experience economies of scale. When purchasing printed brochures, for example, the cost per unit and expense per person will be higher for your small business. This is unfortunate, as it is your small business that requires the most assistance with producing more product, but the money is simply not there. As a result, you will end up using more cash and labour just to keep up and ensure that their production is continuous.

2. Human Resource Issues

With fewer employees come fewer roles. That means positions such as human resources (HR) managers are missing. With small business, there is often a lack of oversight, which can result in HR issues with which larger companies have more resources to deal. The reality is that when HR problems arise in small businesses, there is rarely enough skillset to approach the situation properly. This is due to the lack of funding required to have those specialized roles. Your business has each employee doing more than one job. Therefore, when strong HR skills are needed, the situation is often handled poorly. These issues can become drastic for small businesses, as they require an “all hands on deck” mentality. Of course, HR doesn’t always mean settling employee disputes. Not having an HR individual can also mean a deprived hiring process, lack of training, undocumented performance, etc. If there is an HR issue with one (or even two) of your employees, you invest your time and energy into that problem and the business gets pushed to the side while you address the situation.

1. You Are Small

The biggest hazard of being small is… being small. You are a tiny voice among the buzz of millions of other businesses and you are just trying to be heard. Because you are small it means that you have to work harder for recognition. In 2015, Statistics Canada reported that there were 1.17 million employer businesses in Canada – a lot to compete with when you are small. It isn’t as simple as putting out a large ad like Walmart, knowing that people will flock to you. Every business owner knows that with being small you have to handle the small business blues. Your business has to go to the people, you have less staff to tackle the big problems of business, and there is less money to solve those problems. Therefore, you may be squashed like a bug beneath the behemoth's foot if you fail to move quickly when the larger competition makes a move. It is an exhausting process managing everything at once while screaming as loud as you can in that tiny business voice so people hear you. Keep screaming – if you do it long enough, someone will start to look!

Sources:

https://www.yourdictionary.com/small-business

https://smallbiztrends.com/2015/05/advantages-of-being-a-small-business.html

https://smallbusiness.chron.com/advantages-cost-control-22591.html

https://www.americanexpress.com/us/small-business/openforum/articles/10-simple-ways-to-cut-business-costs/

https://www.entrepreneur.com/article/245008

https://www.economist.com/node/21548945

https://www.ic.gc.ca/eic/site/061.nsf/eng/h_03018.html#point1-1

https://www.snacknation.com/blog/employee-happiness/