Despite all the headlines about billion-dollar exits and IPOs, growing too quickly or too much is not always the most desirable outcome for a startup.
Fifteen entrepreneurs, members of Young Entrepreneur Council (YEC), offer their perspective on why, in some cases, smaller means mightier.
One thing the founders of high-growth companies have to give up is a certain level of control. I’ve personally decided to stay small because of this issue.
When someone gives you money, he usually wants a say in terms of the direction a venture is going. Furthermore, an investor’s goal is to get a great monetary ROI while a founder’s goal is to maximize vision. The two are not always congruent.
If you choose to stay small, you typically can have more balance in your life and pursue other interests and passions along the way. I chose to do this and was able to open more than one business at a time so I could stretch different muscles and try new things.
Staying small and having lower operating costs increases your margins, which leads to profit. High-growth companies often negate profit as their goal in lieu of selling their organization as a value add to another company regardless of unprofitability. If you want your business to continually make profit and give bonuses and good pay, then grow at a logical pace that is sustainable.
Growth for the sake of growth is never a good idea. Staying small can allow for greater expertise in a given field/industry and greater market penetration. I’ve guided my companies with the notion that it’s better to do one thing and do it really well than to try to do everything and end up providing mediocre products and services.
Stay small to perfect core competencies. By growing large right away, your company resources are spent perfecting customer service, business development, infrastructure and other things that really are only a distraction from your core business.
By staying small for the right amount of time, you can ensure your offering fits your customers’ needs perfectly. Learn more about them, take feedback, and adjust your offering more easily than larger companies. When you are confident your core business won’t change, you can pivot.
You might want to stay a small business because of your customer reach. The more specific your niche, the less room there is for growth. Growing pains are in fact painful! If you are happy in your role with the company and the team you have built, growth may not be a good solution.
Quality and Efficiency
I despise overhead and try to limit it as much as possible. And when I think about getting “big,” all I think about is increased overhead without necessarily any increase in output.
We prefer to keep a small, dedicated, focused group at our company so we can control quality and efficiency. Although our company is small, we are able to “get big” with the help of third party contractors/vendors when projects arise.
Small companies that can “get big” when needed and then “get small” again after large projects are agile and nimble enough to compete for all sizes of projects, yet are not burdened by the constant pressure of having to make high payroll. Oftentimes, these companies go after bad business just to keep the machine running. Stay small, agile and nimble to stay alive.
Culture and Quality
You’re only as good as the weakest member of your team. If you have one person dragging down the culture or attitude, it can become cancerous.
High-growth companies that are onboarding quickly run the risk of sacrificing a solid culture and product quality. Focus on building a cohesive group of like-minded individuals who believe in your company’s mission, and you will be able to fight far above your weight class.
Fewer complexities. If you want to run a simple business, then staying small is probably the right choice for you.
A Strong Foundation
As quick as it comes, it goes. Not always true, but for many businesses, racing to gain market share doesn’t always lead to the type of longevity with an impact entrepreneurs look for.
By taking methodical growth steps, you can strengthen your message within your community, grow your offerings in a natural, community-focused manner and carve out a sustainable foundation for growth. One that can weather future storms and secure a more loyal customer base.
If you don’t enjoy managing people or prefer “the work” over “the people” or “the business,” then stay small.
With an investment comes the demand to grow, grow, grow. For many companies, that means adding various revenue channels and losing focus on what made customers flock to you in the first place. Creating a sustainable business is as much about keeping your core customers happy as it is about growing in new verticals.
Making the transition from a small-growth to a high-growth company is tough, and very few do it successfully. There is a whole new bag of tricks that must be learned when shifting to a substantially larger organization, and they tend to catch small business owners by surprise more often than not.
The Boutique Route
If you have an expertise and are in client services industry, a boutique is the way to go because you have flexibility and can work on the projects you want to work on. You don’t have to deal with multiple headaches of growth and numerous employees.
Stay small and partner with larger companies or agencies with larger back-end support. This will allow you to make more money without all the headaches. Boutique firms or business can be highly successful, which people sometimes forget because they aren’t always expanding or hiring.
I’ve seen a lot of companies that have had the opportunity to raise a large venture round, raised that money and then have spent that money without seeing significant growth. Just because you’ve achieved a certain user base or monthly recurring revenue does not mean that you can continue to grow at the same rate in the future. Knowing how to get from $100,000 to $500,000 per month or to $5 million per month is critically important.
I would stay small until you know for sure that high growth is achievable, or you may spend a lot of time and money without results.