Disadvantages of Smaller Firms

Disadvantages of Smaller Firms

• Higher costs – small firms cannot exploit economies of scale because their output is limited

• Lack of Finance – they often struggle to raise finance. If they do get money, it will be at a very high interest rate

• Difficult attracting right staff – may be hard to find experienced and highly qualified staff. This may be because they lack resources and can’t pay them enough money

• Vulnerability – they often find it hard to survive compared to larger firms. They do not have the resources to stay alive when the economy goes down. May also be forced in a takeover.