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Too many small businesses are stuck at the foot of the economic mountain and watch in frustration as larger competitors conquer the top, crack resources and take advantage of the benefits.
Larger companies can afford to take advantage of volume discounts to undercut prices. Banks are happy to accept deposits from small businesses, but they do not build close relationships with credit and credit for their smaller customers.
Even programs marketed for small businesses, such as vendor finance programs and dynamic discounting programs, often benefit the large company who take advantage of the discount. Even government aid seems to favor the well-connected. Check out what happened to the Small Business Administration's Paycheck Protection Program.
However, there are ways small businesses can level the playing field. We can call them the 3 Cs: competition, credit, and connections.
Conclusion: don't participate. Hit them.
If the competition feels unfair, change the rules. This may seem daunting at first, but inventive and nimble thinking goes a long way. Consider this real life example: A Georgia woman who ran a local machine operator refueling business found that she was consistently undercut by established energy giant competitors. She eventually admitted that if she continued to bid on projects under the billing rules set by big competitors who could charge less, she would never win contracts. So she got creative. It offered to extend the payment period to 30 days – a change from the weekly request for payment to customers – and added a small surcharge.
Within a few weeks, she had won every contract she submitted. Customers were happy to take advantage of the extended payment period as they were able to keep cash on their own balance sheets for longer despite the surcharge. This business owner has changed the game over her competitors.
New credit resources when your bank ignores you
Let your bank take care of it or leave it. In our parents' day bankers were local members of the community who really tried to help the local farmer or convenience store grow their businesses.
However, as banks have gotten bigger and more consolidated, you don't know their online lending platforms. You don't know your business. They don't care what your company does. They only care about lending you $ 200,000 because they will make a lot of money on that loan. Demoralizing, right? But remember: these banks are also required by federal law to comply with the Community Reinvestment Act [CRA], which encourages large financial institutions to meet the loan needs of the communities they do business with. This includes low and middle income neighborhoods.
If you have a small business checking account with a large bank, ask a branch representative about CRA compliance – and how your business can help that bank meet CRA requirements through loans and lines of credit. More information here.
You can also visit a local credit union in your area or a CDFI. Both are not for profit and may be able to offer you and your company more personalized services.
Work these connections
Let experts advise you free of charge. Many government programs feel directed against small businesses. Consider the recent $ 660 billion PPP loan program designed to help small businesses pressured by COVID-19 but instead help the rich and politically connected like Kanye West, members of Congress, and big restaurant chains like PF Fridays Chang and TGI.
However, many small business owners do not realize that the government also has free, valuable tools that are available and accessible across the country.
There are nearly 1,000 Small Business Development Centers [SBDCs] in the United States. These are partnerships between the Small Business Administration and local colleges or universities. Many SBDCs are staffed with retired executives who have built and run successful businesses, people who love helping small businesses find resources, build relationships, and figure out what specific capital instruments are needed to grow a business.
SBDCs can also help business owners dig through confusing regulations to qualify for government contracts as a women, minority, or disadvantaged business enterprise. More information can be found here.
For advice on tax, capital, marketing, training, and networking, call or visit your local SBDC.
Outsmart, outflank, outsmart
I've started and operated enough businesses to know that some will always have an advantage. A small business may not have the financial resources to outbid its larger competitors, but it can outsmart, outstrip, and outsmart them.
Look for ways to rewrite the rules and keep track of the 3 Cs.
Competition: Can You Outmaneuver Them By Rethinking Settlement or Other Conventional Practices?
Credit: Ask a bank employee how your business can help that bank meet Community Reinvestment Act requirements on loans and lines of credit.
Connection: Call or visit your local Small Business Development Center for help with anything from taxes to marketing and networking.
The field of play will likely never be tipped entirely in your favor. But the 3 Cs can help you kick some smug rivals off their perches.