Not So Fast: Stories of Smart, Moderated Business Growth
Policy makers and industry leaders have spent much of the fall talking about how to get small businesses to grow and create jobs. But despite the amount of attention they’ve received and the promise they are assigned, the vast majority of small business owners have fewer than four employees, and probably always will. Many small businesses can’t or don’t want to grow–or at least do so in a way that will dig us out of this recession anytime soon.
These realizations have been a source of disappointment for many. But discouraged thought leaders, policy makers, and reporters should be careful not to dismiss small businesses just because they aren’t going to provide the exact solution that we need—they should try to understand where they’re coming from.
There is one group in particular that I’ve found very interesting and largely unaddressed—entrepreneurs who have the opportunity to put their foot on the accelerator but choose not to. These are businesses that are performing well and have great market potential, but who are deliberately moderating their growth. They could go gangbusters, but they don’t. Why? I asked several entrepreneurs about their tempered growth strategy and their rationale behind it. Here are their concerns:
Undermining the Product
Andrew Schrage, CEO of MoneyCrashers.com, a top personal finance blog, has many hesitations about growing too quickly. Chief among them, however, is a fear of compromising his product. “Uncontrolled growth has been the death knell of countless businesses,” he explains. “We have decided to pursue slow and steady growth…to maintain the quality of our content.”
MoneyCrashers.com is committed to providing quality articles that are not only relevant to readers but easy to understand and implement. Pushing for too much too soon would quickly shift the site’s focus from quality to quantity, undermining the very thing that it takes the most pride in. What’s more, faster growth would certainly require equity investment or incurring debt, neither of which is an appealing option for Schrage. He worries about the compromises that come with giving away ownership and the risks involved when companies incur a lot of debt just to grow. Schrage was also quick to point out that if the company were to take out large loans that it would likely fly in the face of the fiscal responsibility that his site preaches every day.
Instead of focusing on primarily on the number of articles, visitors, and clicks, Schrage is focused on growing his company by diversifying content and engaging readers while still maintaining the “small town” feel that has been cultivated amongst his 25-person team.
Compromising the Team
As an angel investor himself, Dave Howell understands the value and place of equity investment and fast growth. Yet, when he has debated that path for his own company, Avatron Software, a leading producer of useful apps for Apple products, he’s always come to the same conclusion: no. “I know we could get to that same place in twice as much time doing our own work and we’d have complete control,” he explains.
But it’s not just relinquishing control that concerns Howell—it’s the impact that rapid growth would have on the environment and team that he has so carefully fostered. In his first few years in business, he has grown his team to 13 employees. While this may actually be a hefty number within the app development world, Howell has instituted very conscientious and thoughtful hiring practices. He relishes the luxury of being choosy about who he hires and carefully accounting for a fit in terms of culture, skill set, and personality. He’s also strict about hiring one by one, taking the time to integrate each person fully before changing up the team again.
Howell doesn’t want to risk the compromises that come with growing too fast and hiring too quickly. He believes that this can undermine the impact of company wisdom and best practices as well as jeopardize employees’ ability to get to know each other and the company more organically.
Jumping the Gun on the Market
Fan Li, founder of online custom apparel company Blank Label, is also hesitant. Despite tremendous opportunity for expansion into other product categories (right now the company only sells custom dress shirts) and interest from investors, Li believes that taking an equity investment could force his company to grow “unnaturally” or in a way that’s out of sync with the market. He sees his business as part of the mass customization movement, which he thinks is still in its infancy, and worries about the risk associated with pacing company growth with something other than market maturity and interest. As he puts it, “the mainstream adaptor is still a long way away.” Should he overextend himself now, he might not be around when the market has the most momentum.
Moreover, there are other elements of his company which are notoriously hard to scale, such as brand experience and customer service. Moderated growth allows him to give these critical functions the attention and focus they deserve. A more sustainable growth path allows them to not just prioritize but also enhance the customer experience, which undoubtedly will yield the most valuable commodity of all—loyalty.
While their individual motivations are unique, as a group these entrepreneurs represent a very important segment of the small business market, and one that we should pay more attention to. Their collective skepticism about the perils of fast growth commands both respect and understanding given where we are today as a nation today.
Over and over, I hear entrepreneurs talking about the benefits of manageable and sustainable growth. My conversations left me wondering how we could best support and leverage this group of entrepreneurs. How can we help them achieve their long-term goals? What is the value of bootstrapping and prioritizing the sustainability of a venture? What does their example tell us about our definitions of success?
I have made the case before that more attention needs to be paid to helping the entrepreneurs who occupy the “missing middle”—that big gains can be made if a large number of people just hired a few more employees. Sure, this won’t solve all of our problems, but at least it would be a reasonable strategy that would actually meet entrepreneurs where they are.
Adelaide Lancaster is an entrepreneur, consultant, speaker and co-author of The Big Enough Company: Creating a business that works for you (Portfolio/Penguin). She is also the co-founder of In Good Company Workplaces, a first-of-its-kind community, learning center and co-working space for women entrepreneurs in New York City. She is also a contributor to The Huffington Post and a columnist for The Daily Muse. She lives in Philadelphia, PA with her husband and daughter. You can follow her on twitter here and here and on Facebook too.
