Creating a successful business is a complex task that requires different procedures and certain knowledge. Statistically, more than 600,000 other small and large companies are opening in the United States. And although these companies operate in the same market, they have fundamental differences in their work processes that prove that the size of a business affects many things. This article will identify the main difference between big and small businesses.
Structure
Large businesses have a well-defined hierarchy between employees and a bureaucratic structure because they have more working staff. The board of directors and the CEO are at the top of this hierarchy, and the major decisions come from them. On the other hand, small businesses have a small team of employees, or even one or two people. Small companies have no hierarchy; one person can handle all responsibilities, and the business owners are the main link in the decision-making process.
Target audience
Here there are no obvious differences, the target audience of companies of different sizes may be the same, but small businesses are focused on a narrower range of audiences. A proven strategy for small businesses is to consolidate sales in one market before entering others, while large enterprises rapidly expand into multiple markets due to the abundance of resources.
The legal structure of a business
The legal structure of a business determines how a business is run, whether the business owners are taxed, and whether the business owners are responsible for the business debts of the enterprise. Small companies start with one or two owners, so they have complete control over their business. They are liable for the business’s debts and pay income tax on the company’s profits. Large corporations tend to pay their taxes separately from the owners. Such companies have responsibilities that small businesses do not have. The owners of a large firm are shareholders and appoint board members by vote but do not participate in the company’s affairs.
Financing
Financing for small and large businesses is done differently. Small companies can obtain funding through:
- Loans
- Community development
- Investors
- Venture capitalists
- Grants from the government
In addition, some small businesses may receive additional income from the Small Business Administration if they have met some research and development goals. Finally, crowdfunding is another way of financing in which small companies receive funds from a large group of people rather than investors.
Large businesses receive funding from larger financial institutions. They can also finance their businesses by selling stocks or corporate bonds or issuing equity capital. In addition, large companies have more resources, such as assets, which they can use as collateral.
The Advantages of Small and Large Businesses
Each of these types of businesses has its advantages. If we talk about small businesses, they have a narrower customer base, which allows them to form closer and more personal connections with the consumer. They are also more flexible, and making any system changes will not cause problems. A shorter process chain facilitates the more efficient execution of tasks.
In turn, larger companies have more established reputations and long business histories. This makes them trust the company more than newly formed businesses. Big businesses have more resources, it is easier for them to get funding, and they have a better chance of surviving during a crisis, thanks to brand recognition.