September 25, 2022

Unitranche

Supportive Business Potential

Is the deck stacked against small businesses?

3 colleagues discussing business (Photo: AYAimages/Adobe Stock)

Small businesses believe they face several disadvantages against larger competitors.

In fact, many small business owners believe the deck is stacked against them as they compete with larger companies.

“There is a growing unlevel playing field between small and large companies as underregulated technology platforms, corporate consolidations and pernicious business practices dramatically restrict markets and stifle competition,” according to the trade group Small Business Majority.

“These challenges have been exacerbated during the pandemic as small businesses pivot their businesses to stay afloat and thousands of people launch new entrepreneurial endeavors.”

The organization recently surveyed small-business owners nationwide about the challenges they face. Among the findings:

Small businesses are at a competitive disadvantage. A majority of small-business owners say that one or more large companies dominate the market in their industry, and the same percentage agree with a statement that “Large companies have an unfair advantage in my industry or line of work.”

Owners want a more equitable playing field. Respondents agree that small businesses are some of the most exciting innovators right now, but they believe larger companies have the resources to take these businesses’ creative ideas, mass produce them and drown small businesses with their market power (83 percent agree). Small businesses also believe larger companies have greater access to capital and employee benefits.

Small businesses are still struggling to recover from the pandemic. Nearly four in 10 small businesses say their revenue has declined since this time last year, while 30 percent say it’s stayed the same.

Small businesses increasingly rely on online platforms. Although many businesses rely on traditional marketing tactics, such as word of mouth (58 percent), a personal website (46 percent), brick-and-mortar shops (30 percent) and online marketplaces also are popular. Facebook’s marketplace leads the way (30 percent).

Common big-business practices are hurting smaller firms. Among the biggest issues that hurt small businesses are predatory pricing, which has negatively affected 34 percent of small businesses and which 55 percent believe is an issue; self-preferencing and copycatting.

Unfair agreements and terms with large companies hurt small businesses. The biggest issue for small-business owners related to contracts and agreements is that there is differential pricing based on the size of the business, something that has negatively affected 41 percent of small businesses.

Small businesses struggle to access fair contracts. Thirty-one percent say that contracts or agreements with larger companies are difficult to understand. One-third have attempted to enter into an agreement with a larger company but were unable to negotiate the terms, and 25 percent felt coerced into signing a contract with a larger company that they did not fully understand.