VOL. 126 | NO. 35 | Monday, February 21, 2011
Small Business Adviser
Does Size Matter in Small Business?
The biggest of small businesses would be that of a professional athlete or movie star. These may be companies with just one employee but revenues of $20 million-plus. More importantly, the $20 million is net. Compare that with the salary of a CEO, a Fred Smith, who runs a global company with 300,000 employees for a mere $5 million salary.
The finances of an entertainer may need to be fed into the Hadron Collider to be fathomed but the head of such a company could care if he has offices in other states or more employees than someone else. He has all he needs. This should be the same guideline when you design your business. You want it to meet your aspirations, your lifestyle and needs, whatever that is. Forget ideas of bigness. About 90 percent of all small businesses have 20 employees or less. About 50 percent of small businesses have five or less.
The design of your business is crucial for your happiness. Do you want to do most of the work? Fine. Then you would be termed self-employed. You value independence and enjoy your craft and so that is how you set things in motion. The big problem with staying this size is if something happens to you your whole business suffers and may cease to be. So, at the least, have a few understudies to ensure business continuity. Self-employed businesses are also difficult to sell and do not bring much money. If you ever do want to quit or retire you must have something of value to sell that is viable without you and has people who know how to do it.
I sold a lot the first years in my business but as it grew it needed control so I came inside and began full-time management. That’s been good. I helped it make more money even though I didn’t feel like it at first. If you do want to grow a business you have to be in position to manage it and not do the work.
The very definition of management is getting things done through others. That is also the path to growing it. Someone has to hire, train, evaluate, measure, plan, motivate, control and meet with outside helpers. That would be you as others do the field work. At a minimum, have 10 employees before you pull out of the field.
It is good for the longevity of a business to have 10 to 15 employees so it has room to cut back should there be a downturn like this recession. If it is just you and a few then there is nowhere to go. The size of your business should eventually determine itself. When you find you get it to the point it makes you what you want, with the time want to spend, then mission accomplished.
Tom Pease is owner of e/Doc Systems, an office equipment company. Communicate with him on Facebook.