Advantages of Keeping Your Business Focused and Small

I like to preach the virtues of keeping things small and simple. This also applies to businesses.

Today, I'm going to list some of the advantages to keeping your business small and focused. For an example, I'm going to use the Valence Group, which is a chemical investment banking firm that specializes in financial advice to firms in the chemicals industry.

Here are 3 advantages:

1. Ability to compete against the "big boys". In the case of Valence, investment banking is a business dominated by a few large Wall Street players. However, Valence can compete against them in the chemicals industry because (not in spite of the fact that) they are small and specialize in that industry. At first, chemical firms might be happy if they can attract a house-hold name from Wall Street but, large, general purpose firms can never give the quality of service and attention as smaller, specialized players.

2. Ability to deliver expert advice. Valence is specialized in an industry (chemicals) where financial transactions involve technical considerations. For example, in chemical mergers and acquisitions deals, plants can't be merged profitably if their processes and outputs are incompatible. Over the years, a firm like Valence, which only handles chemical deals, will have built up a lot of best practice solutions and experience.

3. Ability to attract new business. As chemical firms realize that Valence will give profitable chemical m&a advisory that saves time and money, they will seek them out and give them business. In fact, the larger firms, instead of "competing", might actually hire them as technical advisers and give them a piece of any chemical industry-related financial work they have, in exchange for their experience and know-how.