Small companies have the advantage

I remember thinking when the financial crisis hit that we were very lucky it happened when we were still young enough to remember the earlier, leaner times. We haven’t really grown much fat, and the essence of our plan for coping with the economy is “Remember what it was like in 2004? Let’s do that again.”. Which seems to be working!

I was interested in this HBS blog post on how smaller companies are winning against larger ones these days because they are perceived to be more stable and trustworthy.

The gap of confidence between small companies and big ones is growing. We used to rely on the security of big companies. That’s why we worked for them. And hired them. And put our money in them.

But with the virtual collapse of AIG, Lehman, Citibank, GM, Chrysler, and many more — now even GE is in trouble — all that’s changed. Now it’s a risk to do business with the big ones.

We simply don’t trust companies anymore. We trust people. And in big companies, it’s hard to even find a person to trust as we scream “operator” into our telephones only to get transferred to another menu whose options have changed.

That gives small companies a huge advantage… [snip]

…Small companies that aren’t making millions but provide a good living for the people who work in them. Niche companies whose owners are trying to build sustainable businesses they love rather than fast-growing companies they can flip. They have no intention of retiring. They like working in them. And their clients know that. Which is why they have a loyal customer base willing to invest in the relationship… [snip]

…Small companies with low overhead, reliable owners, a small number of committed employees, personal client relationships, and sustainable business models that drive a reasonable profit are the great opportunity of our time.

Small is the new big. Sustainable is the new growth. Trust is the new competitive advantage.

This might be the explanation behind our uptick in business – we’ve not needed to make any cuts and are unlikely to (in fact we’ll probably hire a few more people soon). We can adjust our approach to fit our customer’s circumstances, and we’re unlikely to make any major changes in strategy (e.g. pulling out of a market – we’re happy with our positioning). Compared to what I’m hearing from the larger companies who have ELN offerings – and are reducing their staffing and investment in this area – that’s got to be a good message.

We’re privately held, stable, profitable, and personal – a year ago those traits would have been looked down on but now it seems they’re just what’s needed.

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