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How Your Small Business Can Compete With a Larger Competitor

The tale of David and Goliath is often on the mind of startups when they consider the question, “how can a small business compete against larger, more established companies?”

The statistics on startups and small businesses don’t look promising; it has never been an easy road to establishing a business.

  • A “small business” is defined by the Small Business Administration as any company with less than 500 employees. And most businesses these days begin with far less than 100.
  • 31.7 million small businesses are found throughout the United States, making them 99.99% of all companies in the country.
  • As of 2019, the failure rate of startups and small businesses is a staggering 90%. When asking how a small business can compete, it seems as though a vast majority of them cannot.
  • According to the research, around 21.5% of small businesses fail during their first year of operations. 30% of them fall by their second year. By the fifth year, 50% or half the number would have failed. And finally, 70% of them would have failed by their 10th year.

The first year is often considered the most critical stage of establishing a small business. It can define whether or not a small business is on the road to becoming a success story. And for many companies, the best way to ensure some degree of success in their first year is through careful preparation. The answer to how a small business can compete, says many experts, is by preparing adequate resources, networking with connections in the field, the proper staffing, and reliable channels for marketing, production, fulfillment, among other processes.

But it takes more than just being “well-prepared” in the basic sense to give a small business an opportunity to succeed. And it’s also more than just standing out from among the rest—it’s also about growing beyond expectations. Every small business and startup is looking for the kind of growth that transcends the statistics of failure among small businesses, seeking to gain a foothold among the mid-sized and large enterprises of the country.

Size Isn’t Everything: How Can a Small Business Compete?

Competition is part and parcel of the business world. However, for many entrepreneurs, startup owners, and small business owners, the scales drop heavily in favor of medium- and large-sized businesses. After all, these larger enterprises have far more staff, resources, capital, experience, and most of all. They are already running on their business profits while smaller companies are still building from the ground level.

But it’s also critical to remember a universal truth in business: there’s competition for everyone, and all businesses face competition. The race is a continuous one, and where small businesses have the challenge of breaking new ground, larger corporations have the challenge of keeping up with the times. How can a small business compete against a big chain or franchise? Consider:

  • Big businesses need constant evolution to adapt, whereas small companies would be born into present trends and can immediately hit the ground running. The bigger businesses, for example, may have been doing things the same way for a while; however, a small business would start with new technologies and techniques without having to retrofit old equipment. They can also opt to employ a service like Red Stag Fulfillment to make sure orders are expertly taken care of. 
  • These small businesses are also often more accessible to local areas, with more affordable pricing, products already in demand, and relatable services instead of larger firms who can’t micromanage as efficiently. As they have to cater to a much more expansive customer base, larger companies usually gravitate to ones that appeal to more prominent and profitable demographics.
  • Small businesses can be more agile. If there’s any evidence of how a small business can compete with larger ones, it’s the ability to respond more quickly to sudden changes in trends. They can develop something new and get it out more quickly instead of a more established business that will have to do market research, R&D, boardroom meetings and other red-tape issues that may hinder their responses.
  • The big companies have already done all the groundwork. At this point, all a small business has to do is to learn from what those before them did. There won’t need to be as much capital spent on figuring out who to target, how to price, and other concerns about the market. How a small business can compete is simply taking what has been done before and determining how to do it well, with adjustments to what they can do with their resources.

The bigger one indeed has plenty of advantages between a small and a large company. But no one in the business world should ever shortchange the abilities of a small business. They have more strengths than they might have considered.

Tiny but Mighty: The Strength of Small Businesses in the American Economy

Even as people ask, “how can a small business compete with giants” in the market, they must never overlook the true strength of a small business in the economy, not just against larger firms. The medium and large companies are but a small fraction against the staggering power of the small business in terms of numbers. 

As mentioned in a previous section, small companies dominate 99.9% percent of the business world. So, even though the statistics leading to success are not good, small businesses significantly impact the economy.

  • With such commanding numbers throughout the country, it’s no surprise that small businesses make up 99.7% of employer firms and are widely regarded as the “lifeblood” of the economy.
  • Before asking how a small business can compete, consider that they are part of a symbiotic relationship with larger companies. Small businesses can support much larger companies as their vendors, suppliers, or even customers.
  • As a vendor or a partner, small businesses can cater to the needs of larger enterprises. They offer solutions that the more prominent company may not provide or cannot produce themselves.
  • As a customer, small businesses take up a lot of the B2B market! With more than 30 million small businesses in the country, it’s not a surprise that more prominent companies do business with them to continue growing.
  • Don’t underestimate the impact of catering to local areas. According to the AMEX 2018 Small Business Economic Impact Study, 67% of every dollar that a small business spends stays within the local community, helping to stimulate the economy and improve the community. The costs go back to local taxes and other services.

From Molehills to Mountains: Ways for the Small to Beat Back the Big

As with the case of most “underdogs,” being smaller means being faster and being cleverer to outmaneuver the lumbering giants. The same can apply to small businesses competing against larger ones.

Perfection is not the goal.

Big businesses have the disadvantage of attaining perfection in terms of products, customer service, and distribution. The expectations are far greater for them in this regard. While trying to meet “perfect” metrics is aspirational, small businesses don’t have that same pressure. All they have to do is maintain credibility and good service. Take advantage of the larger margins for error, and don’t stress the details as much while you can.

Make it a goal to make a more significant impact in lives, not profit margins.

Don’t ask how a small business can compete in terms of the market. Ask how it can compete in terms of changing the lives of customers and employees. If you’re a small business, there is a more significant opportunity to directly affect your customers and employees. You can answer their needs better and more in more personal ways. It builds trust and loyalty in both groups, strengthening the company’s culture and bolstering growth.

Hold onto that niche.

As mentioned in previous sections, small businesses can more easily address specialized needs and provide solutions for customers that larger companies can be too unwieldy to do so. A small business can dominate a small niche market by becoming invaluable to a chosen market demographic. That business might even find themselves becoming hired as sellers for a larger company that can’t meet those needs that only the small business can provide!

Seek out weaknesses.

This is how a small business can compete effectively: find the big companies’ weak spots. It’s unrealistic to expect a small business to go head-to-head with a large enterprise every step of the way. But by studying the more prominent competitors and their techniques, trying to figure out what they’re doing right and wrong, a small business can improve its roadmap. 

Watching a big company can be like having a market research group: Avoid the mistakes they’re making, mimic good strategies, and makes progress go faster.

Innovate, innovate, innovate!

Small businesses don’t have to wait for a board of directors or a whole product development department to sign off on something new. Outpacing the larger enterprises means adapting to new things and implementing them more quickly. 

Have the customers shown interest in a new product? Get it on your shelves right away. More people are embracing this mode of payment or a new platform? Beat your competition to getting a foothold there. 

Stand out from the generic.

How can a small business compete against mass-produced products everywhere? Go the opposite route: be specialized, personalized, and different. 

For many customers, generic seems “inferior” because it’s often cheaply made, and there’s nothing special about it. By offering personalization, more specialized products, or different variations that large companies don’t provide, you lend an image of careful production and the appeal of a “limited” product. 

Appeal to the power of social media.

Nothing is quite as potent these days as the leverage of social media. Big companies are typically cold, corporate, cut-and-dry, and formal when communicating with customers. Small businesses don’t have to be so, especially if their focus is on building brand reputation and creating a closer relationship with their customers. 

They can be scrappy and outgoing on social media, drumming up interest and making themselves more relatable to their target market. And as the most effective marketing is of word-of-mouth, using social media and your closeness with customers as a marketing tool, the good word about your brand will spread faster online.

Final words

In many ways, size does matter. But in the world of business, it’s not just about size: it’s how you use your strengths. Small companies are nowhere near as powerless as some of their owners might feel in the beginning. 

But as many small stories overcome the great, identifying weaknesses in the competition, outmaneuvering them, and strengthening the small community is what delivers the victory. And for small businesses, that victory is an upward trajectory, steady gains, and ultimately, more tremendous growth until well into the future, overcoming the odds.

Have you experienced starting your own small business or working for a startup? What techniques did your company do to compete with the larger, more established competition? Let us know in the comments below.

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