Daniel Ronen, director of Portman Business Consultancy, said that being small could be a positive advantage. “Being a small company means that you can get into markets that are not viable for large businesses.

“Big companies sometimes find that it is just not worth investing in a market because the returns would be too low to justify the effort. But as a small business you generally have a lower cost structure. So where markets are not big enough to support a number of large companies, smaller suppliers of niche products or services can make very good profits.

“They are able to go in and focus tightly on a specific range of products or services and use that to their advantage because they know a big business is not going to come in and try to take their market share.”

Ronen said the secret was to play to your strengths. “The biggest mistake small-business owners make is to say that competition is getting difficult because they are fighting against the big boys. The secret is not to go head to head with them. Instead of trying to compete against large organisations that have the advantage of economies of scale, try to change the game slightly.

“Offer what you are doing in a way that the large organisations cannot compete with or wouldn’t want to compete with. You may want to provide different services or options, or change the way you deliver what you are doing. The secret is to make sure that you play the game on your terms rather than theirs.”

David Abingdon, chief executive of Quantum Organisation, a business consultancy, said that niche marketing was one of the most powerful ways that small businesses could make their mark.

He said: “And it is not just niche marketing — it can be a niche within a niche. It is really all about finding a specific group of people who have particular needs that you think you can target. Any kind of business can do this successfully — hardware store, bakery, office-supplies firm. Any of them can locate or create within their field a proposition that nobody else has thought of.”

However, he warns that small firms need to be smart and think carefully about how they approach the market. “The problem is that a lot of small-business owners play by the rules. They try to play on a level field with the big boys. But they soon find out that unless they do things very differently they will not survive and will get eaten alive.

“The thing to realise in business is that there are no rules. Small businesses don’t have to play the same game or even on the same playing field.”

Ronen said that another key advantage for smaller companies was that they were often able to forge deeper relationships with their customers.

He said: “Smaller businesses have the potential to be much closer to customers and therefore they can finely tailor themselves to the needs of the buyer and potentially supply goods or services at a lower cost than a large business. This is good news because, in general, tailored or niche products command a higher price than a commodity item.”

Ronen said small businesses should take advantage of their size by being as “niche” as possible. “Ask your customers if there are any other services or products you could be offering which they would value,” he said.

John Timpson, chairman and chief executive of Timpson, the shoe-repair chain, said the shops that were most successful were those that forged a strong relationship with their local community.

He said: “The man who runs our shop in Taunton, for example, is known throughout Taunton. He gets involved in the local community and as a result his shop is an absolute moneyspinner. Customers like to deal with people they trust and who they enjoy doing business with.”

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