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.)
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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.
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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.)
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.
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