Flexibility is the lifeblood of the small business. If you’re wondering how to compete with larger competitors, the big mistake is to rely exclusively on price as your differentiator. It’s easy to fall into the trap of thinking that just because you can provide your product or service for less, you should automatically do so.

It will often starve you of much needed funds for growth and stability. Indeed, there’s a good reason why brands like Tesco or Ryanair are flag-carriers for the cheap and cheerful approach: they’ve got deep enough pockets to ride out changes in the market. Small companies need to pay bills today; and price should often be your last-ditch route to market, not the first port of call.

So what else can small companies do to remain competitive and outwit the big boys? Here are my top 5 suggestions:

  1.  Customer service

You don’t ask your customers to “Press 1 for sales, 2 for support”, do you? Of course not: you’re a human being, and that’s what keeps clients coming back. There’s a groundswell of support against faceless institutions and cloned high streets, and small independent businesses are in the vanguard. Rather than blindly conforming to a set of processes defined by “Head Office”, you’re perfectly positioned to offer incentives, a personalised newsletter, the occasional concession or just a thank-you call to your adored – and adoring – customers.

  1.  Agility

When big companies spot new trends, it takes them 18 months to capitalise on it. You don’t have to worry about that: the only person you have to answer to is yourself. Small companies can turn out new ideas in weeks instead. (For great advice on how to do this at low cost, take a look at “Rework”, the book by a team which has launched no less than four pieces of software on a shoestring). To achieve this, work your contacts (whether suppliers, mentors, advisors or partners). Use the web to find suppliers (for example, Alibaba for manufacturers in China, or Guru for professional services from a global talent base). And set a ring-fenced, and tiny, budget to try your new ideas (you can, for example, start advertising on Microsoft AdCenter for pennies)

  1.  Finding your niche

Many small businesses succeed not by being all things to all men, but by doing one thing extraordinarily well. Take, for example, Rob Beer, of vacuumcleanerbags.co.uk. You can see him in the video at the bottom of his homepage. He doesn’t look like he wears a flashy suit every day, but he does know everything there is to know about vacuum cleaner bags. He does one thing, brilliantly – and he’s definitely on our “perfect dinner guest” list. The “specialise to succeed” mantra applies to almost every walk of life. You’d be surprised if Cliff Richard’s new album contained heavy rock. You’d be equally surprised if Little Chef suddenly started serving haute cuisine – which is why in a TV show last year, celebrity chef Heston Blumenthal’s attempts to revamp the Little Chef menu ended in disaster. Do just what you do, and do it well.

  1.  Staff who go the extra mile

One of the few benefits of recession and high unemployment is that you, as a business owner, have an unusually good pool of talent to choose staff from. Just as you shouldn’t use price as your benchmark for competitiveness, you also shouldn’t choose exclusively employ the cheapest staff. Instead, go for genuine talent: the sort of people who share your vision for what your company should be, who eat, sleep and dream customers, and who are willing to help you make the most of every opportunity. Don’t hesitate to offer them performance-related bonuses or even a small option on shares in the company if appropriate- it will be more than reflected in motivation.

  1.  Use technology for everything

Finally, understand the value of technology. In a time when everything else in business is cut to the bone, technology remains a constant source of cost-cutting innovation across every possible business process; and which becomes available to small businesses as quickly as it does larger competitors. Cloud services like Microsoft Office 365, for example, put email, security, collaboration, communications and websites into the palm of your hand for as little as £4 per month. SharePoint, for example, is the platform which many large companies use to create complex websites and collaboration portals. Only five years ago, implementing SharePoint was a four-to-six-figure commitment; today enterprise collaboration costs as little as a couple of lattes for the office each morning.

Next time you find yourself crossing out a quote and putting in a lower number; or talking yourself out of charging the right fee, hold back. It’s a charming natural instinct to be helpful; but it won’t always serve the business well. Charging fairly means charging the right price for the job. So, instead of charging below the market rate for doing an average job which you resent; charge a little bit more and go the extra mile to warrant it.