Used properly, branding can help entrepreneurs take on bigger companies and win, by differentiating what they offer and raising the profile of their businesses. However, many small companies don’t get off the start-line in the branding race, as they don’t understand what the hell it’s about.

They’re put off by the jargon, complicated diagrams and wordy textbooks. And many of those who think they do understand branding have a mistaken belief that it’s only about designing a nice logo. Branding fiascos like the furore over the 2012 London Olympic logo only serve to reinforce this impression that branding is restricted to working on the visual surface of a business. To really create growth, branding needs to drive the way the whole business operates, with four main areas to work on: insight, ideas, impact and image.

Insight: branding starts with clearly defining your target market, then understanding in depth their needs and where the competition is failing to fully meet these. Sounds obvious doesn’t it? But many entrepreneurs are so busy managing their business that they don’t always invest time doing this. Most of them would struggle to paint a vivid, colourful picture of who their target customer is, and what their needs and wants are.

Getting this sort of insight doesn’t need to be expensive, and can often be free. The creators of fresh, fast Italian food chain Fresh Italy got valuable knowledge by interviewing customers outside Pret stores. They figured out that most people wanted a main course, dessert and drink for under a fiver, which helped inform their meal-deal pricing.

Ideas: the next step is defining how a company positions its product or service in the marketplace. What are the two to three key ‘benefits the business will deliver, by solving a customer’s problem, or making their life better? And what are the ‘truths’ about the business that will make customers believe these claims.

Take Pimlico Plumbers as an example. It has positioned itself as ‘The posh plumbers’, offering highly reliable, 24 hour service at a premium price. Its supporting brand truths are highly qualified staff and the fact that the company is trusted by famous celebrities.

Impact: the heart of branding, or what I call the ‘sausage’, is using the brand idea to differentiate each part of your product or service. When Robert Stephenson started computer repair firm the Geek Squad, now entering the UK with Carphone Warehouse, he broke down his service experience into tiny steps. He then came up with ways of improving each step of the process, such as ensuring repair people arrived five minutes early, wiped their feet and spoke normal language, not techno-speak.

The final stage is creating awareness of the business and trying to be famous for something. Having a well defined target audience and clear brand idea will help focus a company’s communication efforts and so make them more effective. By raising its profile, a small company can become a ‘thought leader’ in this chosen area of expertise.

New online tools such as blogging have also created new, cost effective ways for small firms to polish up their communication act and present themselves professionally.

This brand-led business approach has certainly worked for our own small consultancy. Although we only have five partners we were able to successfully win a pitch for the UK’s biggest commercial insurance company against one of the world’s biggest brand agencies with 30 offices in 20 countries.

We were helped by the reputation we have built in our tightly defined area of expertise, brand vision to action, and by our clearly differentiated service: workshop-based coaching from only senior partners, rather than classic consultancy from an army of junior people.Branding is potentially a great way for small firms to take on the big boys and beat them, but only if it’s based on substance, not spin.

David Taylor is managing partner of the brandgym and the author of ‘Never Mind the Sizzle…Where’s the Sausage? Branding based on substance, not spin’, published by Capstone, £9.99