How can small business beat big business at their own game

If you own a small business and you are selling the same products that the big guys are selling you are sort of stuffed. There is just no way you will get the number of customers or bottom line they do by competing directly with them. Even if they could sell at cost, they still have a rebate of at least 2.5 - 5.0% with which they can play with.

So where lies the secret or better still, the money?

Each business sector has it's own strategy, but I will make a few generalizations just to get you going.

The first thing you need to believe is that the big boys can be challenged. They are too busy with their own politics and corporate bullshit to even notice you. So don't be scared. I mean really, can you hurt Massmart. They don't think so.

Secondly, you must target big corporation's weak points. I will discuss three and how to beat them.

Bottom line

The sales personnel are more concerned over turnover than bottom line. So the sales person on the floor has a certain target and that is turnover, they don't know what the margins are (they might but that is not the true profit margin). At management level, yes, they are concerned about bottom line but they are not dealing with customers. They are managing the crap and admin within the company and the shareholders. If you have a small company never focus on turnover.

I keep track of all our sales and the only thing I have on a chart is bottom line and % gross profit (GP). I don't give a damn about turnover. So your target is %GP/invoice. Look at the effort per invoice and the profits made. It does not help getting a $10,000 sale and you have to spend all your time ordering, checking and shipping with a 10% GP while you could have done 5 sales at $1,000 each but with 40% GP and less effort per invoice.  It is often the big deals that take so much time up due to admin, email correspondence, returns etc. that it just does not make sense. Time is money, your time is expensive, don't discount it. A salesperson working for a big company is cheap labour, so they can keep them busy with low GP sales.

Stock

That is a killer.  Big companies are there for convenience and they carry stock. You should never keep any stock. The only time you can keep stock is if you can get better margins from your supplier. In that case, find out what the minimum amount is you must have, and if it is worth it, keep some.  Build a good relationship with your rep, you'll be surprised at their power and influence. For instance, if you are selling stationary and your supplier requires you to carry some pencils, pens and paper as stock, do it. It's cheap, only if you can get an extra 5-10 % discount.  You can easily get that back in sales within the year, after that you have that extra profit margin which is yours.

The internet

One of the biggest sectors you can beat any business, even your smaller competitors. Big companies hire people that no nothing about their business to build complex websites. These programmers can program, but cannot create the content that is required for search engines to understand. You on the other hand can setup Wordpress site in no time and create the content that you know your market segment will search for. In the beginning Adwords will work, but it gets rather expensive and you do not have the funds the big guys have to spend.  Create good content that Google loves, your products will be on the first page and that is ideal.  Once you are on the first page in Google searches, you can stop running Adwords. People tend to click on the items below the ads first because they perceive them as more credible. I have never seen a big company write blogs about their products, they just don't think about it or the programmers are too expensive to do it. You can and should.

These are three basic areas where small business can beat big business at their own game and not even get recognized or threatened. We have been doing it for years and have outlasted 6 national franchises in our area.

You can do it, just think smart.