Though a small business may have many constraints, it also has many advantages because of its size, business model, and proximity to the local communities. When we discuss the benefits of a small business enterprise, it is easy to confuse the scenario with the advantages that an entrepreneur has as the owner of that small business, but these are not the same. From the point of view of a business entity, the concrete advantages a small business has are those competitive advantages that large companies do not enjoy.
In most cases, the most significant advantage of a small business is its flexibility and ability to respond to market dynamics by promptly changing direction due to low overheads. As its investments are at a much lower scale, it can better absorb the losses when making radical changes in company goals, business models, branding and marketing strategy. On the other hand, large businesses find it extremely difficult to resort to such abrupt or drastic changes so quickly or at the same speed.
Furthermore, an MSME can easily cater to small and traditional or emerging and upmarket niches that large companies may be unable to cater to, as it won’t make business sense for the latter due to their focus on standardization, quality orientation, servicing capacities, or high overhead costs. For instance, there is always a market for fresh food and authentic local cuisine in almost all regions of the world, where small businesses become cultural icons due to their rapport and bonding with the local community and expertise.
That is why residents of every small town and city invariably have their favorite local food joints for authentic local cuisine. Large food chains find it extremely difficult to penetrate such markets. A small business can leverage its solid personal bonds with the local community. It is common to see local small businesses supporting each other and being clients of each other, despite cheaper or seemingly better offers from large multinational companies for the same services. Human relations matter, and customers like open communication channels with decision-makers, especially in the case of key service providers.
Meanwhile, clients of prominent business organizations often feel neglected or are actually sidelined. Even when they feel cheated by large unscrupulous businesses, they may give up their rights, assuming they cannot fight against such large corporations. With small businesses, they feel more in control, and this is where small business entities have their exclusive markets based on trust and goodwill. Small businesses can also innovate faster as findings and decisions pass up and down through shorter communication channels with fewer credit poachers waiting in the wings.
Last but not least, due to their known constraints and contribution to local economies, almost every government in the world offers them various grants, incentives, startup aids, tax exemptions, loans at lower interest rates, and special schemes, which can prove enormously beneficial for their existence and growth. These are not available to large businesses. Moreover, as many small businesses are sole proprietorships, they may not have to comply with certain regulations or legalities concerning company registration, maintaining books of accounts, or observing taxation-related formalities or procedures.