Why Do Most Small Businesses Stay Small?

. 6 min read
Why Do Most Small Businesses Stay Small?

Growth is the main factor of any business. It is the change that doesn’t come easily. Any company must focus on consistent improvements because that will make it go to the next level.

Generally, small businesses start up with the cheaper rate of machinery, fewer employees and simple technology. It is alright for the basic structure, but quality improvement is necessary from time to time. Otherwise, the customer range will decrease too.

The small business owners open up the vacancy with a low payroll and demand lesser skills. One of many reasons employees prefer medium scaled business over small firms. The first step should be towards the final goal of the company.

Levels of Business

Most of the businesses fall under any of the following levels:

  • Level 1 - This is where any company starts. This level is the first step and the failure point. Most companies fail at level-1 due to a lack of sustainability in the work and employees.
  • Level 2 - The business thrived through level 1 and made a profit to reinvest in the company, reaching level 2. Many small businesses that remain small are stuck on level 2.
  • Level 3 - The business owners manage to scale up the business. Any business is only able to reach level 3 for its owner capabilities to run the business. Most companies fail in reaching this level. The owner can form a system and chain of work. Without a system, scaling up is impossible.
  • Level 4 - The big companies with revenue of 100$ million. At level 4, the whole system plays an important role. From the sales to accounts and customer service, everyone is responsible. Anyone is replaceable at this level because big companies are dependent on the whole system rather than only on entrepreneurs.

Reasons Why Most Small Businesses Stay Small

1. Running low on money

Most businesses start their firms with a small amount of money that eventually ends. Without proper planning or funds, a company runs out of money and fails. It’s simple.

What to do when a business runs out of money? There are a few options:

  • Cut expenses - If you have a place to pay rent, negotiate the instalments or move your business to a less expensive destination.
  • Find new vendors - Find the vendors that will provide you with the supplies on lower money and negotiate the terms.
  • Cut staff - Cut the staff members and handle the workload till the business starts making money.
marketing strategy banner on white background

2. Marketing strategies

Many small companies do not focus on advertising and marketing. They operate with simple logos, inactive social media and improper websites. To allure the client, you must look at all the parts.

Some effective marketing strategies can be-

  • Social media - Social media marketing can help any business to reach the next level.
  • SEO - For online competitions, you must optimize search engines for the better performance of your business.
  • Content - Content marketing is a crucial aspect of SEO, PPC advertising and email marketing.
  • Email marketing - It is always better to grow your business with mail subscribers.
  • PPC ads - If you want your business to reach more audience, PPC is the best option.

3. Not growing sales

Every business has other competitors. To raise sales, you must have a solid sales strategy to attract customers to your company. An organised sales team can make a big difference.

Ways to improve your sales:

  • Pursue your existing customers and sell more.
  • Sell the services to more customers
  • Launch new products and display creativity
  • Chase new customers
  • Hand-shake with non-competitor companies

4. Not displaying yourself

The fact is simple. Not putting yourself in the market will cause you to lose. For the business to grow, you need to put more effort. Talk about your activities, business and be socially active. A great way to meet and greet new people is through social media.

There is an Indian phrase in hindi, ‘Jo dikhta hai, wahi bikta hai.’ It’s true.

5. Uncertain goals

Just focussing on the daily work is not beneficial for any business. What are your future objectives for the business? The company must have a bigger picture of its goal. The uncertainty of the vision can be a downfall of the company.

Vision is necessary. When you know the destination, you will know the next step to make it possible.

6. Fear-based pricing

When a company starts a business, it keeps the charges as low as possible to make more customers. But, it results in another way. The customers think it is the value of the products only which is false.

You should be open with the prices and making charges. With time, changes are necessary. Keep up the quality with the right prices.

7. Inefficient team

A business cannot grow without an efficient team. While starting up, companies generally hire employees who can work on lower pay. But, the reason can be less working experience and lack of knowledge.

You must hire skilful employees and train them accordingly. The right talent can do wonders in the business. The team behind any business must be consistent enough to deal with rapidly growing work.

animated character getting frustrated by lots of work

8. Excessive workload

In the beginning, the owner tries to do all the work in a rush and thinks about it all the time. But, this cannot last. In any business, you must look after yourself first. You have to be healthy for a healthy business.

Remember the delegation. There are accountants, writers, HR, virtual assistants available 24/7. The owner should plan, decide on tasks and pass them on to your staff members.

Operationalise Failure of Small Business

While there are many reasons for the failure of small businesses, one can try to overcome them. Generally, in small businesses, the owner fails to plan, system and organise the team.

To operationalise a small business, consider the following points:

  • Formal communication: A big problem with a small team is ad hoc meetings. When necessary, meet up and talk. It will not work out every time.

There must be some schedules, formal meetings and proper team management.

Few important points are-

  • Staff meetings
  • Leader team meetings
  • Weekly scheduled work meetings
  • Objectives: While starting up any business, the main goal is to make money. As things grow, the goals should be more precise. The annual objectives should be planned by dividing quarterly and monthly projects. It is a great way to be organised.
  • Organised team: In the beginning, team members share the responsibilities and help each other out. It is great. But, with time, all the members should know their tasks and duties.

The clearer the things, it will be more organised.

It is a plus point that small businesses have fewer fields to handle than large companies. The less machinery, staff and direct communication with clients can help the small businesses in growing. Little efforts and a few tricks can make your small business successful and turn into a big brand company one day.

Also Read:

1) How to Create Mobile Applications for Small Businesses?
2) How to Get the Attention of Small Business Owners?
3) What are the Perks of Owning a Small Business?
4) Why Do Many Small Businesses Never Expand?


Q. What are the most successful small businesses?

Ans. Every small business has demands to grow. But the most successful small businesses with experiences are-

  • Cleaning services
  • Accounting services
  • Legal firms
  • Tutoring services
  • Personal training
  • Web design
  • Mobile grooming
  • Courier services

Q. What are the features of small business?

Ans. A few features that are different from large scale businesses are-

  • Geographically limited
  • Fewer employees
  • A narrow niche
  • Ability to change quicker

Q. Large business vs small business - What is the difference?

Ans. There is a big difference between small and large businesses. The differences include financing, size, legal structure and operations.

The small business has limited customers with a limited niche. A large company can provide many services and products to a large number of customers.

Q. What makes small business better than large business?

Ans. A small business is better for its adaptability. The small business makes it easier to interact with the customers and receive feedback. They can provide better services and products personally to the client’s demands.

It is easy to adapt to changes or trends for smaller businesses.
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