Why Staying Small Improves Profitability

Small businesses regularly apply for working capital loans with us for a variety of reasons.  Although the process is extremely simple (fill out our short 1-minute application, hint, hint), there is one situation that you should avoid seeking working capital for.

Namely, hiring more talent.

Some business owners take the gamble thinking that a larger team could bolster efficiency, creativity, and ultimately profitability.  Nevertheless, old and new research proves this is not the case most of the time.  If you take a look at Fredrick Brooks The Mythical Man Month, Forbes articles like Why Smaller Teams Are Better Than Larger Ones, modern Gallup reports such as The State of the American Workplace you’ll find the same trend.  Small has its unique advantages.  Here’s why.

Focused Engagement

The chief difference between a lightbulb and a laser is focus.  Small businesses can focus with laser-like precision on niche markets that form the backbone of their profits.  Why?  Small teams tend to value individual contribution more than larger corporations.  Hence, as a team increases individual effort wanes.  Furthermore, smaller teams deal with less absenteeism, safety incidents, and productivity lulls.  Focused engagement leads to better communication and better innovation—which happen to be the next two points!

Improved Coms

There are a lot of similarities to business and war (which is probably why so many business men take principles from war manuals like Sun Tzu’s Art of War).  One vital part of any military operation is coms (communication).  Small teams benefit from not having to manage long lines of communication to ensure that everyone is on the same page.  Making sure that everyone is progressing towards the same goal is always a challenge with large businesses.

Innovation

We all naturally want to feel like we a part of something.  When we do at work, we often can come up with great ideas because of our desire to improve the business.  Small businesses can foster great ideas by fueling its small team with thinking empowerment.  As engaged team members interact with each other, there is less of a chance that there will be a “go with the flow” attitude since everyone has a higher stake in the business’s profitability.  Such situations generate the most honest and effective ideas.

At STRADA Capital, we assist thousands of businesses with acquiring the working capital they need to get to the next level.  Yet, we also alert them to pitfalls that could ruin their ventures before they happen.  Our team is dedicated to help our clients stay profitable.  Contact us today if you would like to inquire about a variable financial solution for your company.

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