The Small-Company Advantage in a Downturn
You'd think big companies rather than small have the advantage in waiting out this economic unpleasantness. But Harvard Business Publishing blogger Peter Bregman sees just the opposite. Goliaths are beating Davids at every turn, he says in Why Small Companies Will Win in This Economy.
Bregman's thesis: The Big Boys are shedding employees at a frightful rate. Customers can't figure who they need to speak to resolve a problem. High-touch service has become "Call back when Andy is here." But at small companies, you can get the CEO on the phone. And that's reassuring to customers, says Bregman.
"Small companies with low overhead, reliable owners, a small number of committed employees, personal client relationships, and sustainable business models that drive a reasonable profit are the great opportunity of our time."See his story on Passlogix, a tiny software development outfit that beat out IBM and CA to win millions of dollars in prepaid commitments from customers.
"Now, how do you explain that?," asks Bregman. "The bigger companies aren't getting similar deals. It's not standard in this industry to prepay contracts of that size and duration. And the clients received only a small reduction for their upfront payment, less than the cost of capital. I think it's a trend. And understanding it might just be the difference between failing and thriving in this economy."So you might think twice about making that key acquisition to get bigger. Staying small might be the better strategy, at least for the short run. Just keep your CEO near the phone.