A Small Business Is Not a Business Baby
The “Started In the Garage” Fantasy
The fantasy of starting a small business in a garage, bedroom or kitchen, and then growing it into a mega corporation, is alive and well in our culture’s collective mind. The stories of Amazon, Apple, Microsoft, Ford—pick your favorite—are often used as examples of what’s possible for small businesses. Inspiring? Yes, and there’s no doubt that many small businesses are started in the hopes of becoming a big business one day.
However, those who started these “baby” businesses that grew into giants may have had a strong entrepreneurial or leadership drive that helped them create empires.
But that doesn’t mean EVERY small business has that same vision and mission of becoming a mega corporation. Sadly, though, this baby-to-big business fantasy can make some small businesses feel inferior, overreach and make bad strategic decisions.
What is a Small Business Really?
Here’s an interesting stat from the U.S. Small Business Administration: Nonemployer firms—businesses that have no employees, have at least $1,000 in annual income, and are subject to federal income taxes—account for about three-quarters of all businesses in the United States. Three-quarters of ALL businesses!
Then there are businesses that would be classed as “SMB,” an acronym for a "small to medium size business." By definition, SMBs can have up to 500 employees. Growing a solopreneur, non-employer business into even an SMB would be quite a feat!
So a large majority of businesses in the United States are probably not on track to join the ranks of the mega entrepreneurs, or even SMBs.
What is the Impact of the Business Baby Myth?
Erroneously presuming that every small business is a business baby, just waiting to grow up, can have negative consequences. For the small business itself, having this mindset can encourage the owner(s) to take unnecessary risks and overspend their money and time along the way.
I have seen this several times over the years with solopreneurs and consultants who have spent enormous amounts of cash (sometimes well into the 5-figures!) to build websites, create logos, hire services, rent retail or office space, and more... all to make themselves appear bigger than they are. They can reason that these would be normal expenses for a larger business that they want to be. So they go all in, hoping that the sales will naturally come their way as a result of their investments. Then reality reminds them of who and what they are.
The "Good Problem" Problem
There’s something very heady about seeing a groundswell of sales come in. Some small businesses take that as a sign that they're "growing up" and want to grow faster. In response, they aggressively pursue more sales to make that grown up dream come true. It's somewhat like feeding a baby thousands of calories a day in the hopes that he'll go from being a 4-month old baby into a 4th grader in a hurry.
While it's always good to be looking for ways to increase sales, two things can happen if it's done reactively, in fits and starts, or too aggressively. One, it may not result in more sales due to the law of diminishing returns or because of inconsistent effort. That can be discouraging. Alternatively, if successful, it could cause sales to grow far beyond what the organization has the capacity to handle in the near term. While some say that’s a good problem to have, it really isn’t in many cases.
That “good problem” could also spur spending for more labor, inventory, facilities and overhead. Then what if that sales level isn’t sustainable in either in the short or long term? The roller coaster of costs and operational changes could cause chaos and stress, both personally and professionally.
Small Business Growth Doesn’t Always Mean Organizational Growth
Growth is not for every small business due to a variety of factors such as lack of entrepreneurial or management skill, limited funds to invest in growth activities, and more.
For many solopreneurs and smaller SMBs, getting "big" and growing might mean getting bigger ticket customers and sales, or finding more efficient ways to sell and service... but not creating a bigger organization. For many, this could be a wise strategy that preserves cash and sanity.
So don’t feel bad if you’re a small business and can't or don’t go big, or don’t want to. You are not a business baby! If you’re small and satisfied with your level of sales and accomplishments, you are a success.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
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© 2018 Heidi Thorne