Reasons for Businesses to Remain Small (Cambridge (CIE) IGCSE Business): Revision Note

They offer a personalised service and focus on building relationships with customers (excellent customer service)

They are unable to access external finance for expansion

They provide a product that is in a niche market - small market size but potential for high profits

By remaining small they are able to respond quickly to changing customer needs/preferences

Rapid growth can cause diseconomies of scale which can be avoided by remaining small

Small business owner's goal is (satisficing) rather than profit maximisation

Small firms often provide highly customised or unique goods/services which are sold profitably in small quantities at high prices e.g. pet grooming in the customer's home

Personal relationships can be developed with loyal customers which helps to generate word-of-mouth advertising

Smaller firms can respond quickly to changing market conditions such as changes in fashions/trends 

Small firms are unlikely to benefit from economies of scale as the level of output is lower than that of larger firms

Access to finance such as bank loans or trade credit is likely to be limited

Recruiting/retaining high quality staff can be challenging as wage & non-wage benefits are less competitive than those offered by bigger firms

Small business owners may struggle to take holidays/sick leave as the business relies on their presence to function