Overinvested in Employees?

The current economic slowdown has forced many business owners to reevaluate their expenses.

Especially during a recession, lower staff costs can be a real competitive advantage.  While larger companies are usually forced to slash overhead by executing layoffs, their nimbler counterparts can evolve constantly.

"Businesses must be faster on their feet," says Eric Siegel, founder of Siegel Management, a consulting firm based in Bryn Mawr, PA, and a lecturer at the University of Pennsylvania's Wharton School.  "We're going to see more small firms that can easily dial up or down in their efforts and resources."   

As evolving business models and technologies enable the growth of the microbusiness sector, more tiny companies are likely to achieve huge profits.  "In many cases, you can make more money as a smaller firm," says Siegel.

How do lean businesses outperform rivals with fatter payrolls?

In 2006, the Georgia Institute of Technology studied the methods that forward-thinking small businesses use to maintain their competitive edge.  Many of the most profitable small firms in the study favored strategic alliances, long-term contracts, close client relationships, and highly efficient manufacturing systems.

Source: Fortune Small Business, November 2008