Michelle Rodger: Take the plunge to become a small fish in a big pond

SCOTS love an underdog, but taking on the big boys at their own game and competing in a tough marketplace against corporate behemoths with big budgets and even bigger bottom lines would make even the feistiest terrier reconsider his options.

But then again, for every corporate giant that dominates a market sector, there are countless opportunities that are considered just too small to be worth their effort.

Josh Littlejohn organised an event recently aimed at encouraging young entrepreneurs to play to their strengths in order to compete with larger competitors.

Littlejohn, of Capital Events, agrees it can be daunting to be a newly established business in a sector dominated by a global player, but insists there are many advantages to being a small entrepreneurial business, not least of which are agility and the ability to respond to changes in the market.

It's simply a question of playing to your strengths, he says, to thrive alongside larger competition.

Take the telecoms sector, for example. Dominated by the likes of BT, Cable & Wireless, Virgin and Vodafone, it would appear virtually impossible to break into the market, grow a business of scale and make a profit.

Not so. Spotting the gap in the market left by the conglomerates, Commsworld has grown into the largest independent telecoms organisation in Scotland, with an 8 million turnover and 40 staff offices in Aberdeen, Edinburgh and Glasgow.

Profitable, with no debts and 70 per cent recurring revenue contracted for several years ahead, Commsworld might be small in comparison, but has none of the massive debts, huge pension deficits and significant borrowings of its global competitors.

The opportunities for SMEs to tackle big boys such as these are attractive. According to chief executive Ricky Nicol, it comes down to understanding both the market and the competition. These companies, who are very good on a world scale, just can't scale down to deliver the same level of service, so Commsworld does it for them.

"Small businesses have to make sure the business can generate real cash, and they must have a strong go to market strategy that is sustainable and affordable," says Nicol.

His advice is substantiated by the guys at mflow, who launched just eight weeks ago into a market dominated by a hugely popular corporate with 80 per cent market share – the one and only iTunes.

Oleg Fomenko, Tony Byrne and their team have been working on the business concept – iTunes with a twist – since August 2008. Their focus has been on developing a USP and building a loyal and engaged customer base. Wanting to make the buying experience more fun, the team concentrated on developing a way to allow customers to find new music, rather than just shop the shelves for the bands they already knew.

"Anyone coming into a market with such a big player has to be able to offer something different," says Fomenko. "We saw an opportunity to make the buying experience more fun."

Their success has been in turning their growing customer base into both contributing developers and brand advocates. mflow prides itself on taking customer feedback and implementing the changes every two to three weeks, something a company the size of iTunes couldn't even consider.

The benefit is that customers get used to contributing and get used to seeing regular changes, which means mflow can keep in touch with users and sustain the flexible approach as they grow.

A small business entering the fray needs to be resilient, flexible and to stay close to the customer, says Byrne, but it's probably the most fun anyone can have.

Edinburgh-based company FreeAgent believes the smaller business is better placed to know what the customer wants and, like mflow, has the ability to be flexible enough to include features that the bigger products cannot.

FreeAgent is building a brand in the accounting products market, bidding to win customers from such well-established businesses as Sage in the UK and Intuit in America. CEO Ed Molyneux believes their success comes from staying closely focused on their niche market, and having the flexibility and ability to respond to customer needs.

Molyneux's advice is simple: you're much better placed than the big guys to know what other small business owners want. Identify that need, identify your target market and keep your focus narrow. Then go for it.

Consider a few other suggestions too. Why not piggyback on the big businesses' massive marketing budgets, product advertising or celebrity endorsements by marketing a complementary offering to their product?

Don't assume because they're big they're always right – everyone makes mistakes, so watch, listen and learn from theirs rather than make your own.

And give it a go: everyone loves a David triumphing over Goliath story.