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As a follow-up to a previous post I wrote, Top 10 Reason To Work For A Small Company , I will make it clear that there are also disadvantages to working for a small company.  These disadvantages are not limited to or unique to small companies.  Small is a relative term and can be thought of as 50 or fewer employees. 

10. Less stability (usually) - It used to be that when you finished college and got a job with a large company you would work there for the rest of your life and then retire with a pension plan.  It was nearly a guarantee.  Those days are long gone; however, large companies still tend to have better stability than small companies.  When you work for a small company your risk of losing a job is greater.

9. On your own - At a small company there is no one to hold your hand while you get up to speed and learn what is necessary to do your job.  Some people thrive in this environment but most workers tend to do better when they are told what to do, how to do it, and when to do it.  At a small company there is no room for hand-holding.

8. Smaller clients - Small companies tend to have small clients.  As such you will not gain experience in highly critical environments.  For example, suppose you are an IT company who builds and designs databases.  Small clients will typically have lower transactions and less complex databases.  There is a substantial difference in a database that serves as the back-end for a website that processes 1000 transactions a day and the databases that process search results for Google.  Working for a larger company exposes you to more complex situations.

7. Too much diversity - When working for a small company you are involved in many more areas and functions of the company than what may be in your job description.  Although this wide array of experience is very valuable it does prohibit you from becoming very great at one particular aspect or function.  You have to be good at many things.  You do not have the time to focus and specialize.

6. One bad apple can ruin everyone - Everyone in a small company has an enormous amount of pressure to make the company successful.  One employee who says one wrong thing to one important client can have such a negative impact on the company.  It is too easy for one employee to ruin the company.  As such, it is imperative that you hire appropriately.

5. No hierarchy - To some people this IS a reason to work for a small company; however, because there is very little hierarchy there is very little room for advancement in job title.  If you want to become a manager you have to wait for the current manager to leave, or, if you are lucky enough the company will grow and create new management positions, but at that point, it would not be a small company anymore.

4. All of your eggs are in one basket - Small companies are thrilled to have 1 large client and a large project.  But what happens to the company if that project goes sour or if the client does not pay as expected?  One bad client can have a devastating impact on a small company.

3. No vacation or time-off - For some small companies “no vacation” is an exaggeration but very often there is only one person who knows about a specific process or a specific project and when they go on vacation they must still be checking email and even working because there is no one else who can do their job.

2. Less benefits - Small companies are not able to offer the same health benefits or investment matches that a large company can.  Many small companies offer a 401k investment deduction from your paycheck but do not match any percentage of it.  This can add up significantly.  For example, suppose you earn $50,000 in yearly salary and you contribute 5% to your 401k.  That will result in $2,500 invested per year.  If you worked for a large company they may match the first 3% of your contribution at 100%.  In this example your company would also contribute $1,500 per year to your 401k.  Factor in compound interest over the life of a career and that can total over $400,000 assuming 12% interest in mutual funds over 30 years.  That equates to over $14,000 a year that a large company would pay towards retirement. 

1. Lower salary - Small companies offer their products and services at a discounted rate compared to other larger companies to remain competitive and although a smaller company will have much less overhead costs it still results in lower salaries.  Salaries will generally be on the low end of the range for what the market is paying for a particular position.  This is not to say that the salary is well below market but in certain cases it is significant.

These issues are not unique to small companies and some even apply to large companies.   My preference is to work for a company that is somewhere in-between too small and too big.  What is that number?  No one knows but companies big and small can learn from these points and take the best of them and leave the rest. 

My hope is that during these tough economic times the information I have provided in this post and in Top 10 Reason To Work For A Small Company may help someone decide what they will do with their career.