Why Small Businesses Will Become More Dominant

Elsewhere are presented explanations of why large businesses can become a social problem and why they are characteristically so inefficient. Interestingly, the fundamental reasons that drive large companies to be so judged, need not apply to small privately owned businesses.

Historically, economies of size have driven the evolution of the modern economy and its business infrastructure. The result is a private sector environment that supports only the growth and wellbeing of large public corporations. Small privately owned businesses have no significant private sector infrastructure support whatsoever. They fill local niches in an economy nationally serviced by much larger companies. The Federal Small Business Administration and state governments fund various non-profits. This has brought into being a tax-payer financed means to help support small businesses. Inevitably, this has created a bureaucracy lacking an understanding of the actual infrastructure needs of small businesses. The result is a fragmented and largely unprofessional business sector that performs well below its potential. That can now change.

Computers, robotics, FAX, UPS, FedEx, the Internet and the World Wide Web – all of these now provide services readily affordable for the creative use of small businesses. This allows them to now perform in many ways that a few short decades ago were impossible. This is a trend that is constantly accelerating. The benefits attributed to economies of size are fast disappearing. The spectacular inefficiencies characteristic of large businesses are becoming ever greater liabilities.

Small businesses lack the structural impediments that cause such inefficiencies. This means that rapidly diminishing economies of size coupled with increasing opportunities for efficiency and productivity improvements in small businesses, are leveling the playing field. Small businesses will increasingly come to function in ways that maximize their fundamental advantages viz-a-viz large businesses. This will create a new competitive environment where an expanding, aggressive small business sector will encroach on large business sectors where the impact of diminishing economies of size are greatest. A new private sector small business infrastructure will gradually emerge replaceing the current ineffective and philosophically indefensible, government financed system.

This scenario will happen when small businesses realize they are a unique species of business, toss out the old text books and learn to operate in fundamentally different ways than do large businesses.