Why Small Business is Better than Big

Every business starts off small, some stagnate, some grow moderately and some grow into the multi-nationals that we’re all familiar with today. Obvious benefits arise as a result of being a large business such as a high volume of customers, increased capital, brand awareness and achieving economies of scale. However being a big business doesn’t make you the best in the business, it simply makes you big. The Department for Trade & Industry in the UK define a large business as having more than 250 employees and a turnover of greater than £11.2 million.

Now I must begin by stating that not all big businesses are bad, but I firmly believe that most of them result in more negative than positive factors and here’s why:

Shareholders

Big companies too often prioritise shareholders as the most important stakeholder by striving to generate increased year on year profits aimed at distributing dividend payments. With CEO’s and Directors all receiving a vast portion of their remuneration packages in shares, shareholders form an elite club as the most important stakeholders in a business. It should always be the customer!

Greed

An unhealthy focus on shareholder satisfaction is one example of greed, but there are countless examples of greed – banks, no further explanation required here! The bonus culture is crass, think about how useful that money could be to employees, customers, product development and securing a company’s future. Lord Sugar is a famous advocate for large remuneration and bonus packages insisting that it’s necessary to attract the top global talent. If a Director is willing to accept tens of millions in bonuses then are they really the right people to have at the top? Is such a grossly huge salary best for customers and employees? Opportunity cost doesn’t enter the equation here. John Lewis offer £500,000 as their top salary and more companies should follow their exemplary lead.

Homogenisation

I own an i-Phone, I love it but I’m not unique and don’t stand out. Walk down any high street in any town or village and you’ll see the same shops, people wearing the same clothes all communicating on the same types of phones. We now live in a homogenised world with homogenised goods and services and that’s not healthy for the consumer or for free market competition. Customer service also becomes homogenised, how many times have you spoken to a call centre with people programmed to ask the same questions in the same tone all day every day? Now consistency is important to maintain quality standards, but as a customer I know I’m just a number on a database who must be rushed off the phone as quickly as possible to satisfy call handling times. Even employees are becoming homogenised, programmed to think “the company way”.

Company structure

How flexible can a big business really be? How do they respond to changes in consumer demand and market forces? A decision from Director/Managerial level cannot effectively be distributed across numerous countries, departments and cultures. The time taken in a big business to respond to market changes simply cannot occur immediately and the very nature of being large ensures that inflexibility is a major flaw of the big firms.

Achieving a higher volume of customers comes at the expense of the quality time a big company can dedicate to each individual customer. Striving to achieve economies of scale often results in diseconomies of scale, with a failure to understand cultures and scalability. Money breeds greed and greed breeds failure all because you want to be big. Being a big business is over-rated, there’s nothing wrong with being small because – Small Is Good.

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