Reasons Small Businesses Might Want to Stay Small

Every business and every entrepreneur’s situation is different. Therefore, there is no one or two reasons, why a small business might want to stay small. However, there are some things that make small businesses better, easier to operate compared to large businesses.

I have used this metaphor before, where small businesses can be compared to small boats. Where large businesses are large cruise ships. It is very easy to change the direction of a smaller boat where changing the direction of a larger cruise line takes a lot of time and effort.

There are benefits to scaling up, and growing your business as well. We will dive deeper into both, the benefits of small businesses as well as the benefits of growing your business in this post. Let’s get started.

Benefits of keeping your business small

Keeping your business small comes with a lot of benefits, not all listed here. You might have your personal reasons as well, but these are some ways keeping your business small can be beneficial.

Adapt to changing world easier

First, small businesses can usually adapt to changes easier and faster compared to larger ones. The operations can be changed easier when they are small, if suddenly the situation of the world changed like it has been during the past few years.

Small businesses fit into smaller market gaps

Another benefit small businesses have is that they can fit into smaller market gaps. If there is demand for a service or a product in a small town or city, that might be too little market gap for larger businesses to fill it.

More personal service

A third benefit is that small businesses can offer more personal service to their customers. They can get to know all their customers better, since their customer base is smaller than a large business would have.

Less stress

Keeping your business and operations small means you have less to worry about. Less to worry about often means less stress, and you can sleep your nights a little bit better.

Less capital and less risk

The fourth benefit of small businesses is that they can be started with less capital. Therefore, the risk is smaller. Yet, the profit margins can be higher compared to larger ones. The results of the business can also be seen faster, compared to if your business required millions of dollars in loans and the operation was slow to start.

Better quality control

The fifth benefit of small business is that you can control quality better. You can make sure that every product or service that your company offers is top notch. No exceptions, you can supervise your production line easier than if your business was very large.

Another post about why small businesses can be better than larger ones can be found here.

Small businesses are an important aspect of the economy overall. The world is changing and new opportunities for new businesses come every year.

Benefits of scaling and growing your business

Now that we have got the benefits of staying small out of the way, we can continue to reap the benefits of expanding your business. Like I mentioned before, every situation is unique and there is no right or wrong answer to whether you should scale your business or not.

Different cost structure

The first benefit you get when you scale your business, is that your fixed costs of running the business take up a smaller part of your costs. No matter how large your business gets, you might only need one office, one accountant, etc.

If your business is online-based, fixed costs like rent and internet bills stay the same, no matter how large your business grows. Unless you have to rent a larger office due to new employees or so.

Bulk deals

The second benefit of growing your business is that you might get better deals from suppliers, when you order larger amounts. There are usually bulk discounts, at least in some industries, where the more you order, the cheaper the unit price gets.

More diversified customer base

The third reason to scale your business operations is that you will likely get more customers. This means diversification among the customers, and your business is not relying on one or two customers, but rather a larger number of customers. More about risk management in business in this post

Experimenting is less risky

The fourth benefit you get from growing your business, is that you can try out new fields of business with less risk. If you wish to expand your business to new fields, new areas maybe, the capital needed to test the waters from your overall capital is smaller, compared to if you were to run a small business.

Larger profits and faster expansion

The fifth reason to grow your business is that it should overall generate more money, even if the margins are lower. Therefore, you can expand your business from that point on even faster and quicker, and reach exponential growth if you do it right.

Risks of not scaling and expanding your business

There are risks of not scaling your business as well. If there is room for expansion in your field of business and you decide not to expand, chances are, new competitors will come and take those areas.

After they have established their businesses, they might come after your customers and expand into your areas and fields of business.

There is always risk when expanding, but there are also risks when deciding not to do something. Not to expand into new parts of the town or new items on the markets. Someone else might take that opportunity and eventually run over you.

Final words

I am repeating myself here, but like I have said a lot of times, whether to expand or keep your business small, it is always situational. There is no right or wrong answer to that.

Keep in mind that there are risks when growing your business, but also not growing has its own set of risks. You can justify not growing with any of the reasons I listed above or your own. If you are happy the way you are, why change a working system.

If you want more business-related posts, you can read them here.

Hopefully this was helpful to you, have a nice day.