What does that really mean?
What Does It Really Mean To Be A Small Business?
If you are like millions of ambitious people who have a desire to start a new business, then you would be joining the heartbeat of your economy. Approximately half of consumer and business purchases are through small businesses in most areas of the world. With new small business resources becoming available more and more in America, small businesses are the primary driving force for economic growth helping to create the largest economy country in the world. Because of this, small businesses are important, powerful, and necessary, and you too can be a contributor to this economic growth. You are needed.
A Brief History Lesson
All businesses start small; in fact, prior to the industrial revolution, every business was small. The idea of department stores, factories, franchises, and other large business innovations did not get invented until the 19th century. Prior to this, every business was small, from the local dairy to the hardware store. Clothing, groceries, farming and building materials … everything was purchased at a small business, and much of what machines do for us today was done by hand. Life was mostly a long list of daily chores that revolved around families and local communities with small businesses.
It wasn’t until the mid-1800s when some businesses got larger. During the Industrial Revolution businesses expanded as technology became available. This new technology came in many forms, including the harnessing of energy from flowing water, to automation machines that helped create factories to make cloth, processed food, and the manufacturing of other mass goods. Also the telegraph created the possibility for long distance communication, railroads for moving goods, and the steam engine to harness construction faster than ever before. Men and women could also be employed to run the machines in factories and work sites, and with this unions got created to help ensure appropriate pay and benefits, in order to protect them from owners who no longer had to engage directly with their employees.
But it is the small business that resurged in the 20th century. Though big businesses are here to stay, these larger businesses could only reach so far. With the help of small business development center, small businesses can be more effective where personal service is needed, or in regions where larger businesses are not profitable to serve. Also small businesses were found to be more adaptable, more innovative, and could customize products and services to best fit the buyer’s needs. Also, employees were found to be happier as they could perform different types of services or work within a business eliminating repetitive or unfulfilling roles. It is these types of things that help drive small business growth to the point where they contribute about half of today’s economy.
What Drives Innovation In A Small Business?
What makes small businesses successful even in an age when large businesses can dominate? There are three aspects that drive innovation in small businesses that are often superior as compared to a large business:
- Vertical Markets
- Size And Personalization
- Potential For Growth
The first is small business tend to have more expertise in the type of products or services sold. Sometimes referred to as a vertical market, small business owners succeed in their business primarily because they know their business better than anyone else in their area. They are experts.
There are many different vertical market experts. They could be an expert in retail, perhaps specializing in certain types of clothing, knowledgeable about jewelry, or in other types of products sold. Or, they could be an expert in specialty services such as dry cleaning, massage, hairdressing, or other type of specialty service. There are literally hundreds of different types of retail shops selling every kind of product or service; all of whom are experts in their business.
But vertical markets are not just in retail. There are plenty of small businesses in every kind of vertical market. There are small businesses in automotive sales or repair, insurances of many different types, construction including specialties in electrical, plumbing, and a host of other construction categories. All of these vertical markets require expertise, and successful small businesses will endorse and promote their expertise for their customers, who need their products or services.
Smaller Size Means Personalization Possibilities
The second aspect that drives innovation in small businesses better than with large enterprises can be simply their size. Bigger is not necessarily better. Though there are pros and cons for virtually every sized business, small businesses have distinct advantages. One of the biggest advantages that a small business has over larger businesses is personalization. Often the customer works directly with the expert, and not through multiple levels of staff or processes that lead a customer to just become a number. This direct contact enables higher quality of products or services, as well as better results to meet the customer’s expectations.
Another advantage that small businesses have is that there are many different sizes of small businesses. You can be a small business working out of your home, doing sales, accounting, or a variety of other contracting work. On the other hand, you could still be considered a small business with up to 500 employees, such as in farming, tele-sales, or manufacturing in a number of industries. Small business size can make a difference depending on your expertise, so working with the right size for your business may give you a distinct advantage.
Potential For Growth
The third aspect that drives innovation in a small scale business is potential. Though big businesses could arguably have potential as well, it is only with a very small number of notable exceptions in big business where the company continues to grow at a high rate. However, the potential for small businesses to grow quickly is much higher and more common. This is primarily due to low financial expectations at the start, of course, but the real potential comes from experimentation of your products or services. When you get the right mix … bam! Your business then grows very fast! This exciting potential is reserved only for small businesses, but it takes hard work, dedication to your business, and lots of listening to your customers, which small businesses are best enabled to do.
Take for example, Tasty Brand baby foods. Tasty Brand is a small business that started because of the lack of puree baby food options in groceries stores. Competing with big processed food manufactures, two moms started making their own baby food from organic ingredients for their own babies. Then they decided to make their baby foods available to other moms which led them to realize that there was a big demand. Today they are a $2.5m annual business with distribution within their local region.
Accidental Food Truck
In another example, two graduate students wrote a business plan as part of a competition. Though they didn’t win, then believed in their plan and started a specialized Chinese restaurant. Funny thing about this new business is that it simply didn’t do very well; so thinking again about how to differentiate they decided to go from brick and mortar to food truck. Having nearly gone bankrupt the food truck play proved to be the trick, where now that have grown the business to over 70 employees, offering bog food truck and brick and mortar locations. The flexibility and nimbleness of a small business allowed for a big adjustment to their business plan that ultimately led them to success.
This last example is where a small business was born out to create a better customer experience. A mom took her son to the barber and wanted to make the trip a special occasion. With video camera in hand the experience actually proved to be mundane. So with an idea that getting a haircut could be fun, she set out to create a barber shop for kids; adding an experience of fun and play just to get a haircut. Today, with multiple franchise locations in the northeast, Snip-its is now a growing small business.
Whether it’s a personal experience, a small idea, or just simply doing some everyday task a little differently, the personalization and flexibility of a small business has a big advantage over big business. With a small business loan, or the help of your local small business administration, let your ideas be know, and bring innovation to your local community by starting your small business!