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In this Recession, Small is the New Big

Smaller companies relate to their clients one-on-one and you've got a recipe for success at a time when people are very careful where they spend their money.

Last week I came across an article titled ‘Why Small Companies Will Win In This Economy’, Paragon is a boutique design firm, so a title like that is sure to capture my attention.

In the article, Peter Bregman makes the argument that large companies who’ve traditionally had the competitive advantage, may now face a new reality: that they’re more of a gamble for prospective clients, than smaller firms, who are more likely to keep their staff intact in the present economy. Add to this that smaller companies relate to their clients one-on-one and you’ve got a recipe for success at a time when people are very careful where they spend their money.

Bregman sums it up perfectly saying:

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

SOLD! I’ll take 2 please.

If you own a small company but you’ve never read Bo Burlingham’s book Small Giants, do yourself a favor and get your hands on a copy. For those days when you feel like you’re not a “real” company because you choose to be small, this is the sort of stuff that reminds you it’s OK if it’s not your goal to be a mega-conglomerate. Or as he phrases it, if you choose to be great rather than big.

There’s a problem though: lending institutions have not gotten the memo. With credit not flowing like it should, the small guys who are poised to take advantage of new market opportunities, are discovering that without capital to help them grow, they may lose out anyway. I mean, it’s one thing to survive in a tough market…I’ll be the first to say THAT is easier if you’re smaller. Growth however is a different story.

Then there’s the health insurance industry. The small guys pay more. It’s the old tale of the haves getting more and the have-nots getting less. Aside from my own personal distaste of this system (being one of the pay-more-for-less crowd), this is another factor that may stand in the way of new market opportunities. If small companies need to hire in order to capitalize on new opportunities, not only will they have a hard time getting money from the banks, but they continue to face the fact that as usual, offering good benefits to their staff will cost more than it should.

Call me naive, but I think that the banking and insurance industries ought to start throwing their support behind the little guys who are showing growth potential at a time when the big guys are tossing people overboard as fast as they can. From my perspective, spreading your risk over a broader base in smaller increments seems smarter than putting all of it in the proverbial one basket. Of course, this is a designer talking….without the fancy MBA or finance degree I might be entirely off-base.

In his article, Bregman mentions that the small company he references was able to get prepaid commitments from clients, a great way for them to take advantage of new opportunities without relying on traditional streams of growth capital.

I hope the lending institutions are paying attention. We’re entrepreneurs. We’re scrappy. We’ll find alternate sources of of funding if you won’t support us…and that won’t be good for YOUR business growth.

Susan Isaacs

Susan’s a multitask-er who prides herself on the vast number of things (read: loose papers and coffee cups) on her desk at any one time, and yet she still manages to keep an eye on all the moving parts at Paragon.