From printing to marketing consulting, a multitude of small businesses are meeting the needs of larger businesses and corporations. Every niche faces its own set of challenges, but small businesses have a lot of commonalities.
The importance of flexibility in business simply can't be overstated. Whether that means changing your business model, lowering prices, outsourcing or leveraging innovative, value-added pricing strategies, today's small businesses may want to consider embracing corporate flexibility to survive.
Competition and the Freelance Factor
Freelance talent can be a major competitor for established small businesses. When professionals find themselves out of work, many look to freelancing. The added competition, which often comes at a lower cost, can pose a challenge for established boutique firms.
"Of course we're facing increased competition," says Matt Michel, CEO of Service Nation. "Every successful business faces increased competition over time. Competition keeps us awake at night. It keeps us from becoming complacent. It spurs us on to outpace them."
Small businesses bringing a quality product or service to the table may not be stifled by freelance competition, but encouraged by it.
Some entrepreneurs see competition as proof of demand. It's not necessary to be the first to enter the market; it can be about doing it bigger, faster or better than everyone else. That's why the importance of flexibility in business can't be overstated. With the capability to adapt and mold offerings and experiences to deliver better products, higher-quality services or greater overall value, small businesses can earn market share even in the most saturated niches.
Onshore and Offshore Outsourcing
For boutique firms, the trend toward outsourcing is a plus, as corporations gladly enlist smaller firms to help with non-critical business components.
Outsourcing can also mean more affordable labor for some businesses.
—Matt Michel, CEO, Service Nation
"We've seen a significant increase in our business because of our global hiring in the Philippines," says Sander Daniels, co-founder of Thumbtack. "We have a team of 150 hardworking, talented people who have allowed our business to thrive."
On the flip side, however, U.S.-based small businesses could see work decrease if their niche is a service that's easily provided by offshore workers.
Pricing is another area with two sides to its story. During periods of economic turmoil, some businesses may drastically drop prices just to make it, while others may make a killing.
Individual complications are dependent on the niche market they serve. For instance, small businesses serving core business components could suffer as corporations seek full-time staffers to meet those needs. But those in specific target markets are more likely to thrive during periods of global economic strife.
"Over the last year, we've actually been able to increase prices on our site," says Daniels of Thumbtack. "Small businesses are always looking for more clients, and we can bring that to them very affordably. Businesses are willing, even eager, to pay for new clients."
This speaks to Thumbtack's business model: Serving new leads to small businesses, especially those desperate to secure new business.
Small businesses that help other business owners to thrive may see an uptick in revenues as those other owners seek any opportunity to increase revenues.
A Flexible Business Model Could Allow for Pivoting
If times are tough, some small-business owners consider pivoting to meet the changing needs of consumers in their niche.
"We have completely changed the way we market ourselves, from strictly being a PR firm to more of a marketing agency," says Becky Boyd, VP of MediaFirst.
"We needed to do this because of the economy," Boyd explains. "Companies are not hiring PR agencies anymore. But they will outsource to a marketing agency. We have also had to lower our prices to get clients."
Again, corporate flexibility and adapting to market demands can be the key to success. Small businesses can actually be at an advantage in this regard compared to major enterprises, where embedded systems and processes, multiple layers of decision-makers and broader, slower feedback loops can hinder corporate flexibility.
Small businesses, on the other hand, can benefit from having tighter, rapid feedback loops and more direct involvement from decision makers, as well as looser processes and systems. These factors can enable small businesses to respond readily and rapidly to shifting demands. Customers—both B2B and B2C—prefer working with companies that are responsive to their needs, so a flexible business model can also foster customer satisfaction and brand loyalty.
Pricing Strategies for Small Businesses
With pricing often emerging as a sticking point for small businesses experiencing a decline in sales, some companies find success with alternative pricing models, rather than simply lowering costs. Service-based businesses tend to have a bit more flexibility in terms of pricing models compared to product-based businesses.
A service-based business utilizing a cost-plus pricing model may pivot to subscription-based pricing, hourly pricing or tiered, volume-based pricing. Some small businesses may find success with performance-based pricing, in which customers pay for results rather than time or services.
Product-based businesses aren't without options to innovate on pricing, however. SaaS and other software companies, for instance, can leverage volume-based pricing or a freemium model (in which basic features are offered for free and advanced features are available on paid tiers). Other product-based small businesses find success with bundling product offers to add value or coupling products with services, such as a free one-year support plan with a product purchase, or on the flip side, a free product with the purchase of a service package.
The Importance of Flexibility in Business
When businesses embrace corporate flexibility, it can be possible to weather these challenges.
Some small-business owners have succeeded because of the outsourcing trend. Others have increased profits by outsourcing some tasks to offshore talent.
Price points are in constant flux, as some niche markets are in high demand and can realistically raise prices. Others must lower their price points to attract new clients, while some leverage innovative pricing models that increase value for customers without sacrificing revenue.
At the end of the day, customers want to feel as though they're receiving value. A flexible business model can help a business shift its core focus to accommodate market demands.
A version of this article was originally published on March 29, 2012.