Large multinational organizations will typically follow standard guidelines on how to grow and expand their business. General requirements such as extensive employee training, adherence to environmental standards and a thriving corporate culture are among the top requirements for a large business to succeed. However, the formula which is often used to ensure the success of a Wal-Mart, do not always apply to a small business. (For more, check out 6 Reasons To Be Excited About The Small Business Job Act.)

IN PICTURES: 8 Tips For Starting Your Own Business

One of the fundamental differences between a multibillion dollar corporation and a "ma and pa" style shop is that a Wal-Mart can enter a new market and remain unprofitable for years as earnings from prosperous locations support those that are not performing well. Large businesses have more and often unlimited resources to market their products and services, and are for the most part able to replicate a proven business strategy in a wide range of environment. The owners of large organizations are usually not involved with the basic day-to-day operations of the firm. Small businesses do not have such luxuries.

Although there is no proven formula for a profitable small business - otherwise we would all be rich entrepreneurs - there are several important traits that are common to most small businesses.

Cater to a Niche Market
A small grocery store simply cannot compete with a Wal-Mart, just as an independent toy maker cannot drive a Toys-R-Us out of business. Therefore, small businesses must cater to a particular niche market, either selling foods that are specific to a particular ethnic community for example, or building toys that are not easily accessible through major retailers. Targeting a small group of people who have specific demands is an ideal way to attract an initial customer base. (Don't miss Starting A Business? Consider This First.)

Get Cozy With Customers
Once a small client base has been established, it is vital to maintain good relationships with your customers. Unlike major chains which can advertise to the whole community, small businesses often rely on word of mouth recommendations. Whether you are an independent accountant or a fisherman, the most effective and cheapest way to attract more business is through referrals.

IN PICTURES: 8 Ways To Survive A Market Downturn

Be Flexible
Businesses that experience success in their initial endeavors should be able to expand to other markets while retaining the initial customer base. For example, a Russian grocery store can start to import Ukrainian and Polish food in order to attract more business. Such measures ensure business growth outside of the initial market while maintaining the original customer base that made the business successful.

Focus on Skills
Large businesses have the flexibility to move beyond their initial services simply by hiring experts in those fields. Small businesses, on the other hand, are not able to do so. Entrepreneurs who find success will usually focus on what they know.

A Canadian with an accounting background may not have the necessary skills set to open a Russian store. Likewise, someone who recently came over from Russia may not have the expertise to start an independent accounting practice. (To learn more, see Build Your Small Business During Downswings.)

Get Lucky
No matter how well planned out the business model, some businesses seem to catch on and others fail. Some small businesses even begin to expand, opening new locations and targeting broader range of consumers, yet others remain true to the owner's original idea. While hard work, location and a thought-out strategy can undoubtedly improve business activity, sometimes luck can be the most important driving force.

The Bottom Line
Successful small business entrepreneurs will seek out information on where an unfulfilled demand in their community exists and cater to fulfill that gap. However, there are certain fundamental differences between the operations of a large corporation and a small shop. Successful business owners will capitalize on these differences to implement a strategy that works in their favor.

For the latest financial news, check out Water Cooler Finance: The End Of The Recession.

Related Articles
  1. Investing Basics

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  2. Entrepreneurship

    How to Run a One-Person Business

    Learn how to get a successful one-person business up and running with a business plan, financing, time-management tricks and delegation of tasks.
  3. Entrepreneurship

    Top Legal Tips for Starting a Business

    Before you launch a new business, make sure you're on top of the key issues that most startups face.
  4. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  5. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  6. Entrepreneurship

    Multilevel Marketing Isn't Always A Scam, But It Often Is

    Nerium and Amway are popular direct sales companies that recruit new buyers and sellers to make a profit. Sadly, many direct sales firms are scams.
  7. Executive Compensation

    How Restricted Stocks and RSUs Are Taxed

    Many firms pay a portion of their employees’ compensation in the form of restricted stock or restricted stock units.
  8. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  9. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
  10. Entrepreneurship

    Are You Really an Entrepeneur? A Reality Check

    If you are going to be an entrepreneur, and you’re doing it on a shoestring, you’ll need more than a good idea. Here are some skills to master.
RELATED FAQS
  1. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  2. How does escheatment impact a company?

    In recent years, state governments have become increasingly aggressive in enforcing escheatment laws. As a result, many businesses ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center