Entrepreneur coach Jeremy Harbour often asks his audience: “Have you ever tried breaking a pair of chopsticks? Easy, isn’t it? They are so fragile that we often break them accidentally.”
“But how about a whole bunch of chopsticks? It’s suddenly much more challenging. The individual chopsticks may be vulnerable, but together they are stronger, and with the right numbers, they are virtually unbreakable.”
The same is true with businesses. Small businesses are inherently vulnerable, but through collaboration and partnership with others, they can gain the strength of a larger business.
The SME Struggle
Even at the best of times, small businesses are vulnerable, and it is an accepted fact of entrepreneurship that many businesses will fail within their first ten years.
Debt & Capital Vulnerabilities
With many small businesses barely breaking even, any fluctuation in cash flow can have a disastrous effect.
Global Economic Changes
Small businesses can be very vulnerable to global changes. These global economic changes can negatively affect small businesses in every country, but those in smaller economies are most at risk.
Expansion
Although expansion is a positive sign, it is also a time when businesses are highly vulnerable. Quick expansion can result in rash decision making, leading to hires and purchases that the business may come to regret later.
Safety in Numbers
Just like chopsticks, businesses can find safety in numbers. By combining small businesses into a larger group, each one lends their strength to the others. This decreases their vulnerability to bad debt and global fluctuations and can help them expand quicker and with lower risk, taking advantage of their combined strength.
This strategy is called agglomeration and was invented by serial entrepreneur Jeremy Harbour, who also teaches courses on buying and selling business at The Harbour Club.
