Why is it important for a small business to establish a competitive advantage?

It is important for a small business (or for any business) to establish a competitive advantage so that it can create a customer base that is loyal to it.

A competitive advantage is simply anything that sets one business apart from another.  If a given small firm does not have a competitive advantage, people will not perceive any reason to be faithful to that business.  They will patronize competitors’ firm whenever it is more convenient for them.  Therefore, a firm needs to create a competitive advantage through something like the quality of its products or its service.  This will make customers feel that that firm is better than the others and the customers will be less likely to patronize other firms.