Pros & Cons of Working with Small Businesses

Pros and Cons of Working with Small Businesses

There are many benefits to working with a small business. As procurement agents review bids from both big and small companies, they should consider the needs of the current project and select the right-sized company for the job. Here are some pros and cons of working with small businesses.

Pro: Big fish in a little pond
When you hire a small company, your project is a huge part of their business. You’ll likely get more personalized attention, probably with direct communication from the owner. Their success depends on your business, so they’ll take extra steps to make sure everything goes well.

Pro: Decisions are made quickly
There’s not a lot of red tape when it comes to working with small businesses. While a change in direction or scope may take time to work its way through a larger company, a small business is likely to be able to turn on a dime with quick approvals. 

Pro: Might be willing to negotiate
A small business might be willing to negotiate their rates to capture your government’s contract. A larger business usually has a pricing structure that can’t be adjusted. However, a smaller business has the flexibility to set its own rates for each project, so there might be some wiggle room if you need to trim some expenditures.

Con: Might have higher costs
While they may be able to negotiate labor costs, other items could be more expensive. Small businesses don’t have the same buying power as a larger business, so inventory or supplies that can be purchased in bulk with a large company might be ordered project-by-project with a small company, ultimately costing more. 

Con: No backups
Smaller companies often run lean, hiring only the people they need for a project. If someone gets injured or sick, there’s often no backup person to take that role. A larger company might have multiple employees that do one job while a small company probably only has one or two. If something happens your project may get paused until the owner can find a replacement person or the person who’s sick gets better. 

Con: Less organized/not as reachable
This isn’t necessarily true for every small business, but sometimes owners can get overwhelmed with everything on their plates. When you run a small business, you must manage current projects, RFPs, and future projects, as well as any employee concerns or needs. This means that the owner might be stretched thin, or not as available as a project manager at a larger business with a big staff. 

Finding the right fit
There are pros and cons to working with both small and big businesses. Procurement agents need to review the needs of the current project and determine if a small business would be the best option. DemandStar has access to over 150,000 suppliers both large and small, whatever your project needs may be.

Have you worked with small businesses in the past? What pros and cons did you find in the procurement process?