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Bigger Isn’t Always Better: Why Do We Insist on Using Big Firms?

We do it in every walk of life. Instead of choosing a local independent cafe or snack bar, we will go for a McDonalds or KFC. Instead of shopping at our local greengrocer, butcher’s or convenience store, we will drive a few miles to the nearest ‘Big 4’ supermarket.

We see the same in professional services. People fall over themselves to work with, or work for, another ‘Big 4’, this time in the world of accounting – KPMG, Deloitte, PwC and Ernst & Young. And whilst there is not quite the same level of dominance by less than a handful of firms in the legal profession, in the UK names like DLA Piper, Clifford Chance, Allen & Overy and Linklater come fairly close.

By the nature of market economics, there is always going to be a continuum in size from large to small businesses. But how exactly do the biggest businesses get so big, and why do they hold such sway on the purchasing decisions of everyone from the shopper on the street to boardroom decision makers?

Sizing up success

Success can have something of a snowball effect. Once a business starts doing well at something, word gets around, it attracts more business, it starts to grow. If you were to plot it on a graph, you could say that up to a certain point growth depends on a business being able to reaffirm its reputation over and over, relying on word of mouth and positive reviews to maintain the momentum.

After that point, however, none of that is needed anymore. Businesses that reach a certain size are able to grow simply because they are big. They have the resources to aggressively invest in more growth. But crucially, people naturally equate size with success, and a lot of the time choose big business on that basis.

McDonalds must make the world’s best burgers because they wouldn’t be so big if they didn’t. The Big 4 accountancy firms must offer the best service, otherwise no one would use them.

On a rational level, most of us know that this isn’t the case. There is a certain amount of push back against the biggest businesses dominating their markets too much, as it ends up restricting choice. If you want the best of anything, from burgers to financial advice, choice and competition are important, and no one benefits from a handful of businesses getting too big.

The importance of small businesses

In economic terms, small businesses are absolutely vital. In the UK, the overwhelming majority of companies – upwards of 99 per cent – are counted as SMEs, and they account for 60 per cent of private sector employment. Around half of private sector company turnover in the UK comes from SMEs, amounting to £1.9 trillion.

By choosing smaller firms over large, you are not just propping up an important sector of the economy – you are actually making a choice that brings benefits to you as customer and client, too. It is often said that small businesses can offer better levels of service. Because they serve a smaller customer base, they can get to know customers and clients on a personal level to meet their needs.

There are also arguments around putting money back into the local economy, helping to build communities and support local entrepreneurs.

In terms of professional services, I think this article from TechRepublic sums up the arguments for choosing a big firm versus a small business or even a sole trader very well. We assume that the biggest companies always snap up the best talent available. But once you have joined a big company, you are always able to ride the coattails of its reputation.

Smaller operators have to prove their credentials with every client to maintain theirs. The incentive to uphold the highest standards when it is your reputation and your business at stake is that much higher.