Why “Go Big or Go Home” is Bad Advise
I sometime cringe when I see blog titles like “
A quick summary of the article is:
- You’re spending too little on marketing.
- You’re spending too little on sales.
- You’re failing to develop scalable processes.
- You’re failing to develop a unique value proposition.
- Your hiring and firing is being done wrong.
However in this article I wish to address a more fundamental question….. Why is being small bad or undesirable?
If you own a small business that provides a yearly salary of $250,000 to $500,000, how is that bad or undesirable?
It’s really a question of perspective. If your goal is “Total World Domination” you’ve fallen short. If your goal is strong business with sufficient profits, you’ve done very well.
Small Businesses ARE Disadvantaged
This is part of that whole “wealth redistribution” thing, and allow me to give you some examples to make my point.
- It’s very difficult for small hardware stores to complete with Home Depot and Lowe’s. The ones that still exist today have been around a long time and own the buildings they occupy, which keeps their overhead low. Opening a new hardware store today feels like financial suicide.
- Neighborhood coffee shops can not hope to compete against Starbucks. I recall a scene once on the Simpsons where the kid was walking through a mall, holding a paper cup with a Starbucks logo, while the logo above every store front was also Starbucks. They were going for comedic effect. However, the reason jokes are funny is because they speak some element of truth.
- Now let’s talk about doctors. 15 years ago 80% of doctors were in private practice. Today 90% work for large medical conglomerates. In Northern California we’re down to very few big businesses. There is Sutter, Kaiser, and I’m sure there must be one or two more but right now I can’t think who they are.
I call this the Big Box phenomenon. It’s happening in industry after industry. Even some dentists are now becoming employees of Gentle Dental, rather than risk a private practice being killed financially as they go this route too.
It’s especially harsh on doctors because insurance company reimbursements rates are much higher for big hospitals than it is for small practices. One doctor documented that Medicare pays $180 for an echo-cardiogram in his small office, but pays the big hospital down the street $450 for the same procedure.
My sister in law is a doctor in private practice in Texas, and she has a similar experience with flu shots. She pays much more than the big hospital and is paid much less.
Niche Small Businesses May Actually Have an Advantage
One thing about the big box phenomenon is they are large bureaucracies with fixed processes and supply chains into which it’s very difficult to insert something “non standard”.
A while ago I needed a three inch flapper valve for a toilet. Most toilet flapper valves are two inches. I went to Orchard Supply (owned by Lowes) and Home Depot. No luck. It’s not a standard size.
I have a friend who likes to ensure she buys “fair trade” chocolate. It’s not available at the supermarket. Not even the organic one that sells free range meat. It’s considered a specialty item.
When you service a niche that is sufficiently small that the big businesses don’t make money in it, you have an opportunity. But you can not take advantage of that opportunity with a brick and mortar store. You must service a wider geography.
Your Niche Business Needs a Strong Online Presence
Whether you sell specialty soaps, coffee, plumbing parts, or biofeedback devices, the only way to reach the larger world is through the Internet.
It is a form of democratizing commerce and allowing people who actually enjoy being small to start small, and MAYBE grow big later, but not necessarily.
Creating and expanding your online presence can be accomplished many ways.
I’m personally a huge proponent of Inbound Marketing as I’ve seen it transform businesses. While marketing through social media networking sites, product sales sites (such as Amazon.com) and service sales sites (such as Yelp) all have pros and cons, nothing builds your long term online presence like Inbound Marketing.