Why Two Similar Small Businesses Perform So Differently: A Practical Look at the Resource-Based View

As a business consultant working mainly with small and medium enterprises, I’ve always been intrigued by a simple question: why do two businesses that look almost identical from the outside perform so differently?

Walk down the main street in Burnie at lunchtime and you’ll see it. Two restaurants, side by side, offering similar menus at similar prices. One is buzzing with diners; the other is nearly empty. When the opportunity arises to review these businesses, and especially to speak with their customers, the reasons for the difference quickly become obvious. As Duncan Watts famously put it, “everything is obvious once you know the answer.”

For advisers, the real challenge is helping business operators understand what will make their business successful before they start, rather than offering wise observations after the fact.

The Limits of Traditional Small Business Advice

Traditional business advice tends to focus on familiar topics:

• Identifying and understanding target customers
• Managing profit and cash
• Accurate costing and profitable pricing
• Forward planning
• Managing people
• Managing risk

All of these matter. But even taken together, they don’t guarantee success. In my experience, two operators can follow the same checklist and still end up with very different outcomes.

Models like Porter’s Five Forces are widely taught and extremely useful - for big business. They were developed by universities, large consulting firms, and multinational corporations for organisations that have some influence over their markets. Small businesses, by contrast, have almost none. They cannot influence suppliers, customers, competitors, or supply chains in any meaningful way. As a result, models built for big business often fall short when applied to small operators.

Because of this, advisers like me have become adept at adapting big-business frameworks to suit the realities of small business. But even then, the common “tell me your problem and I’ll give you the answer” approach doesn’t work. Good advisers work through well researched structures and frameworks without relying solely on the adviser’s experience. Every small business is unique because every owner is unique. Their skills, experience, aspirations, attitudes, and resources differ - and these differences shape the business far more than external market forces.

Why the Resource-Based View Works for Small Business

Over the past 15 years, I’ve found one framework that consistently helps small business operators understand their opportunities and build stronger strategies: the Resource-Based View (RBV), originally developed by Jay Barney.

The RBV focuses on the internal resources a business has - or can access - that provide a sustainable competitive advantage. Importantly, “sustainable” here refers to commercial sustainability, not environmental sustainability.

According to the RBV, a business gains a sustainable competitive advantage when it possesses resources that are:

• Valuable – They help deliver something customers genuinely want.
• Rare – Competitors don’t have them, or don’t have them to the same extent.
• Hard to copy – Competitors can’t easily imitate them.
• Non-substitutable – Competitors can’t offer something else that delivers the same value.

If all four attributes are present, the business has a sustainable competitive advantage. If one is missing, the advantage is temporary. If the resource is only valuable, the business is merely on par with competitors. If it’s not valuable, the business is worse off.

This framework was originally developed for large firms, but in practice it is perfectly suited to small business because it focuses on the one area small operators can control: their own resources.

What Counts as a Resource?

In small business, resources are far more than equipment or money. They include:

• The owner’s skills, experience, and reputation
• Unique supplier relationships
• A distinctive location
• Proprietary processes or ways of working
• Staff capabilities and culture
• Brand identity and customer loyalty

These are the elements that make one restaurant full and another empty. They are also the elements that small business owners often overlook because they seem “normal” to them - but are not normal to their competitors.

Why RBV Matters More Than Ever

Most academic writing on the RBV focuses on large organisations. Practical guidance for small business is almost non-existent. Yet small business operators benefit enormously from understanding their unique resource mix because it helps them clarify:

• Their target markets
• Their preferred customers
• Their market position
• Their branding
• Their product or service development priorities

When reviewing an existing business, the RBV helps identify areas of strength that can be leveraged and areas of weakness that need attention. When assessing a new opportunity, it helps operators understand whether they truly have the resources required to succeed.

My experience applying the RBV with small business clients has been overwhelmingly positive. It gives operators a structured way to think about what makes their business different - and how to turn those differences into commercial advantage.

RBV and Niche Pricing: A Natural Fit

One of the most powerful outcomes of RBV analysis is the ability to build a niche pricing strategy. Small businesses, especially in small markets like north-west Tasmania, cannot survive on high volumes and low margins. They must do the opposite: focus on higher margins and lower volumes.

By understanding the unique resources they bring to their business, operators can design products and services that justify premium pricing. This is not about charging more for the sake of it - it’s about delivering value that competitors cannot easily match.

The Bottom Line

Small businesses succeed not because they follow a generic checklist, but because they understand and leverage the unique resources they bring to the table. The Resource-Based View provides a practical, powerful framework for doing exactly that.

For small business operators looking to assess opportunities, refine their strategy, or strengthen their competitive position, the RBV offers clarity, direction, and a way to build a business that is not only competitive - but sustainably so.