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Why Refusing To Stay Small May Be A Big Mistake
publication date: Jan 31, 2011
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author/source: Robert Craven - The Directors' Centre
“Wherever something is wrong," wrote the economist Leopold Kohr, "something is too big."
At a small scale, he observed, things are "flexible, healthy, manageable and delightful, even a baby's ferocious bite". Conversely, at a large scale, things become unstable and easily assume the "proportions of terror". (The Guardian) Many businesses succeed in their early days when their founding entrepreneur is working “at the coalface”. Then (s)he gets tired of that, and grows the business, gets away from the coalface, and everything starts to stutter. The business does not function as well as it used to. The founding entrepreneur gets disheartened, and casts around for grasses greener, so the business falters further. All the hopes and aspirations vanish as the dream company takes on the shape of a living nightmare. This tortuous hell takes over the founder’s life and sucks at his life force making him/her incapable of making any kind of truly rational decision. While it sounds like the things that fantasies are made of - a dreamer’s passion turning into a poisonous curse – I am afraid that this is very much the truth for many business owners especially as we drag ourselves out of the current recession. So, two big mistakes of small companies: 1. Letting the founder stop doing what (s)he does best – and the most common example of that is stopping meeting customers and clients, and stopping providing solutions her/himself for them. Delegation is necessary, but only when you have “cloned” (or trained) other people to be as good. 2. Thinking that success means growing the company. Staying small and profitable may mean more satisfaction, better life-work balance, and a more sustainable (recession-proof) business. We are obsessed with growth because of the example the media presents of “successful” people. Staying small and staying close to the coalface may be the smartest thing to do. Getting bigger should not be assumed to be the right strategy for every company. That creates other problems – like succession and small-scale expansion – and that needs outside help from other people who have already been-there-and-done-that. And, if you think you have the stamina - The Valley of Death As we grow our business it seems almost inevitable that we have to pass through several 'valley of death' experiences, usually at start-up, then again in the growth stages. As a skilled micro business owner, you could perhaps make, say, £100,000/year. But as soon as you start employing people, your profit tends to decline (with rising overheads, and the time taken for systems and staff to become fully productive). It isn’t until much further down the line that you tend to get back up to decent profitability (perhaps making £100k profit on turnover of £1m). The number of employees you have at this stage varies depending on your industry, but is typically between five and 10. Recession or not, knowing that the ‘valley of death’ is not unique to your own business is little comfort. What's more, you don't know whether it's a small dip, or huge valley – or, worse still, perhaps it's a cul-de-sac you'll never get out of. It's at this point that you question if the goal is even worth the hassle. Are you willing to pay the price to break through to the next level? These are the critical points where most growing businesses fail. My advice is when you hit the valley of death (and if you are convinced that you will succeed), you should run as fast as you can. Sprint to get to the other side and to the next layer of sustainable profitability. But beware, the light at the end of the tunnel may just be an express train heading your way. I'll leave the last word to Woody Allen's character in his film Love and Death... "I shall walk through the valley of the shadow of death. In fact, now that I think of it, I shall run through the valley of the shadow of death, cos' you get out of the valley quicker that way". The Directors' Centre is a Business Consultancy that uses practical, honest, results-focused advice to deliver improved sales and profits. Talk to us, contact The Directors' Centre. Tel: +44 (0)1225 851044, email: office@directorscentre.com or www.directorscentre.com |
