Good things come in small packages – or so that’s how the old saying goes. But if ‘bigger is better’ which should we choose?
When it comes to running your business, no one way is correct.
Yet, the business community is under the impression that growth and speed equals success – despite two-thirds of the fastest-growing businesses ending in failure. So, why does society risk this boom and bust cycle, rather than striving for a small and lean business?
Here we discuss some of the key pros and cons of keeping your business small to help you assess whether a slender approach is right for you.
Less Overheads (More Time)
It’s no big secret that staying small means businesses can unlock significantly lower overheads than their larger-counterparts, with savings on costs such as:
- Office space
In fact, research from Llyods Bank suggests that, due to a reliance on informal sources, small businesses can continue to save significantly – replacing the financial costs associated with accountants and support services with business advice and favours from friends, relatives and former colleagues.
With significantly reduced overheads and the negated requirement for expensive loans or investors, it is perhaps no surprise that most small businesses start turning a profit by year two with efficiency and their lean structure to thank.
However, for what you save in overheads, you may be paying back in time.
So, if time is money, where do we draw the line?
High Control (High Stress)
Large companies often have thousands of employees in a number of offices – separated by time difference, distance and culture. However, with a small business, this is much less likely, increasing your ability for control.
By controlling all elements of your business, such as overseeing departments, a holistic approach can be applied to business. This may aid you in making informed decisions such as how and where your business operates and give you the ability to take a strategic focus.
However, the dark side to this ability to take control is an inability to switch off.
As a small business owner, you are the business. If you don’t deal with a problem, no one will. So how can you take a break?
Being a small business owner can be a big burden to bear alone. Failure to delegate can lead to overworking and feelings of overwhelm and stress.
On average, small business owners only take two weeks holiday per year – with 81% reporting that they make or return business calls during this time. So, is this an indication that small business owners struggle to relax or is it because they love their job?
You may be surprised to learn that smaller organisations are the happiest at work – with many owners stating that they ‘love’ their job and would do it if money were no object. That said, being a small business owner will still have a significant effect on your lifestyle.
Ability to Adapt
With size comes cumbersome red tape that slows down a business’ ability to adapt.
- Slow sign-off
These are just some of the reasons why staying small can help businesses be more nimble, adaptable and agile –positioning them perfectly to respond to change.
We have seen this recently, with the global pandemic taking the world by shock. Many small businesses quickly snapped back into action – moving operations online, changing their offering or even pivoting to take their business in a new direction. This is an unrivalled benefit that large businesses struggle to replicate well.
However, evidence shows that small businesses are less likely to take out loans, with female business owners being particularly frugal with their money. Due to this risk-adversity, although the business is set up with the strategic flexibility to adapt, a lack of resource may hinder this in action.
Happy Environment (Harder Cuts)
Instead of feeling like silos scattered with seas and sands between them, small businesses can enjoy the benefits of being one, happy team.
A study by LinkedIn found that employees working for small businesses created the most positive working environments, with 77% of employees reporting that they would recommend their employer to a friend. This is for a number of reasons:
- Higher control over the work process
- Sense of belonging
- Social relationships
- Higher job satisfaction
- Opportunities for development
- Ownership of their work
And, with increased productivity being a result of so many of these factors, the argument for staying small is strong. But what’s the drawback?
According to Duréndez et al, small businesses have less formal management, control measures and processes in place – often relying on a single figure-head to make decisions. In small businesses, it was found that close social relationships, for example, friends or family influences, may cause leaders to make bad business decisions, such as keeping deadwood.
In light of the last few months, it leads us to consider whether small businesses will fail due to their increased loyalty and inability to make the tough cuts that may be required to survive. We urge business owners not to make this mistake and to, instead, reframe smaller businesses as a lean and favourable option that sits on the table.
Is staying small right for you?
The answer – it depends on you.
Just remember, a smaller, more lean business doesn’t have to be a back step. It can provide a number of great benefits that make your business a more profitable, productive and enjoyable place to work.
Restructuring your business can feel like an overwhelming task. However, right now, many businesses are being forced down this route in a bid for survival.
During these testing times, the team at Crosse HR are trying to do their bit – supporting small businesses by providing free templates to help time and resources go further.
Download our free restructuring toolkit here and take your first step towards a smaller, leaner business.