Economies of scale is the “cost advantages that enterprises obtain due to their scale of operation.” By definition, small businesses are small and often pay more for the same things than larger organizations, at least when it’s figured on a unit basis. For example, there’s buying power for bulk purchases and there’s the ability to spread payroll costs for employees servicing larger enterprises. There are several ways to scale business in order to optimize economies of scale.
Some ways to consider:
Mergers
Large corporations often grow by merging with other companies. In 2025, several huge companies got even larger by merging. Examples:
- Union Pacific acquired Norfolk Southern (the merger is scheduled for completion in 2027)
- Merck acquired Verona Pharma
- CoreWeave (an Nvidia-backed company) acquired Core Scientific (a crypto miner) (the merger is expected to close in Q4 2025)
A company doesn’t have to be large and have tons of money on hand to be able to merge with another. For example, this month innovators Public Products acquired BC Sales, a contract apparel decorator in Sarasota, Florida. For small businesses, merging or simply getting acquired may be merely a matter of finding the right fit to achieve certain goals:
- Cost savings from shared overhead, buying power, and technology access
- Market expansion from cross-selling, larger customer base, and bigger brand strength
- Talent and expertise by becoming able to have more managerial capacity (e.g., an HR and/or IT department)
- Financial improvement through a stronger balance sheet and better access to capital
- Succession planning by having a way for an owner to exit the business
Joint venture
A joint venture is essentially a partnership between two entities to achieve specific goals for the short or long term. As in the case of mergers, a joint venture presents the opportunity for geographic expansion, access to new customers, and cost sharing. Each business retains control over itself, but works with one or more other businesses for the purpose of the joint venture.
For example, local restaurants can band together to offer “restaurant week” and split advertising costs.
What to think about: Be sure all parties understand the objectives of the venture, whether it’s finite or of unlimited duration, who pays for what, and whether each company’s culture generally aligned with others in the venture.
Co-branding
Co-branding, also referred to as cross-promotion, occurs when two or more businesses work together to market a product, service, or event using each participant’s names. This isn’t a merger or joint venture; it’s a marketing strategy that’s ideal for local businesses. For example, a local restaurant may use organic products sourced from local farms. The restaurant shares the name of the farms; the farms explain how their products are used by the restaurant.
Final thought
“Mergers are like marriages. They are the bringing together of two individuals. If you wouldn’t marry someone for the ‘operational efficiencies’ they offer in the running of a household, then why would you combine two companies with unique cultures and identities for that reason?” ~ Simon Sinek, a renowned motivational speaker, author, and business consultant
If you’re looking for ways to grow your business, look beyond your own business and see whether working with others is a pathway to success.
Further reading about financial management for small business can be found in this list of blogs.
