Small Business is Not a Little Big Business

The role of big business is to increase shareholder value. Shareholder value is increased when the stock price goes up. Stock prices change with expectation, not necessarily performance. That means the company leaders are focused on managing public perception rather than making the company work well.

Here is a link to an interesting discussion with Roger Martin, Dean of the Rotman School of Business. He’s talking with Michael Enright about shareholder value and business building. He’s the 3rd interview in this hour-long broadcast.

Not all big business is this way, but if they aren’t, they are an exception.

Small business is about lifestyle for the owners, the staff and sometimes even the customers. Profit, while necessary to keep the company rolling, is not the primary focus. The focus is on building a quality life for everyone involved.

MARKETING
Your brand is the business owner and to some extent the staff. Your brand is the story your customers tell about your business. Every small business has an interesting story and you need to tell yours as often as you can.

Social media makes that easy and inexpensive. Look around you and you will find many examples of people who are great at telling their story.

HR
More of the human resources are outside the small business than in it. That means HR is about leading rather than managing people. Inspiring people is key; communication takes place in public and telling people to do it because “you said so” won’t work. Think: collaboration, cooperation and community.

Staff roles are much wider and more varied. Job descriptions are much more difficult to pin down. Look for personality traits rather than specific skills. You want people who are able to problem-solve, to think critically and who will take the initiative to make things work. The more training you give your staff, the more valuable they will be. While training is expensive, it is a perk that the right people will value and will make up for smaller pay.

Your culture is important. It is your story and how you treat the people around you. You build your culture, so be deliberate and make it work for you.

Proceduralists are not attracted to small business and they do not thrive in an entrepreneurial environment. The skills needed to set up processes and procedures will be in short supply. The more predictable you can make your repetitive tasks, the more time and energy can be devoted to more creative work. You will have to work on this.

OPERATIONS
Process and procedures will be used as guidelines to build upon creatively as you do the work of your business. It’s important to recognize that you will be able to offer a more personalized and customized service. Make sure to price that way and not try to compete on price against others offering a cookie cutter approach.

Your business development and marketing people are close to customers. Feedback is available. Talk to front line staff and take some time to examine the emerging trends. This is a huge advantage, so use it.

Small business has the ability to change quickly, to respond to changing customer needs.

FINANCE
N is much smaller and statistics don’t scale. A difference of 1 in 1,000 responses is a 0.1% change, but a difference of 1 in 10 responses gives a 10% change. If you have 20 regular customers and you make a change that you hope will increase your numbers, the minimum measurable response you can get is 5%. Looking for a 1% change that can’t physically happen is an exercise in frustration. Don’t worry so much about statistics.

Small business owners don’t measure shareholder value, they measure lifestyle. Many considerations go into that equation beyond the numbers.

For small business to look only at the numbers means they are not measuring what is important. A company may not turn a large profit, but if the owner’s extended family are making a good living, the owner gets to travel and live life on their terms, the company is a resounding success. Think about what is important to you in your life and see how your business can give you that. That is more important than a fat bottom line.

A strong company with long term viability is more important than short term profits. Small business have the luxury of being able to make long-term decisions without concern for the next quarter’s dividend payout. That means being able to invest time in relationships; try slow growth, yet robust strategies and treat staff, customers and suppliers like the important business resources they are.

Running your small business like it is a little big business won’t work. You end up focusing on the wrong things and not using the advantages inherent in your size.

Your Effortless Business is about focusing on making your business predictable, making your environment work for you, building a team and making sure the work you do pays well. When you do that, your marketing, HR, operations and finance are taken care of.

Does that make sense?
What other advantages are there to having a small business?

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3 Comments

  1. Frank Smythe

     /  March 6, 2012

    I strongly disagree with your shareholder comments. Market confidence is the key denominator – not greed or farces, unless of course your in the auto, banking, or government back related industries. Big business is your friend, and not an enemy.

    Other factors not discussed – It will come as no surprise that the coming decade will be complex, volatile and uncertain, but it will also provide many new opportunities for small businesses and their customers in the U.S.and abroad, And the driving force behind these opportunities will be innovation.

    And all SMB’s will get ever more specialized. Customers will increasingly seek customized products and services. The rise of innovations such as cloud computing, a
    flexible workforce and lower-cost manufacturing options will make it easier for small businesses to seek out product & service niches.

    Startups for all entrepreneurs will get easier and cheaper. In response to growing niche market opportunities, lower equipment costs – better technology, it will be easier than ever to launch a business without a big investment. This means more innovation, as new ideas can be tested without much risk – and startup companies will proliferate.

    Big ($100m) & small firms ($5M to $10M) will join forces. Collaborative partnerships with big companies will increase, as small companies bring to the table innovative practices, market agility and intimate customer knowledge. Which begs the question – What will big firms offer small businesses? Marketing and distribution power so that they can take their innovations to broader markets.

    And Web 3.0 (and beyond) along with mobile technologies will become the great equalizer of big and small, with customers no longer knowing – or even caring – about the size of the firm that provides their goods and services.” In a niche economy like ours where personalization is sought after, being a small company actually be an advantage as your able to innovate and adapt almost overnight.

    And I think consumers may, in many cases, prefer to do business with small firms provided their needs are being met. And today’s hardware and software we use daily get smarter almost by the minute, helping folks make everyday decisions and streamline complex tasks. That’s especially good news given that data and artificial intelligence will become even more critical to competitiveness. And information overload isn’t going away – so smart machines to help us deal with it will be very welcome.

    Frank

    Reply
  2. Thank you, Frank,

    I think we are saying the same things about shareholders. It’s a matter of focus. I tried not to make a value judgement, but maybe I wasn’t as careful with my language as I thought.

    I love your take on the current environment. Yes, a time of change, which makes a time of incredible opportunity.

    I think we will also see a rise in short term, project-style collaborations. Ad hoc teams coming together to create a project that will become a viable business with a management team brought in to run it. Or it may be sold. Or the idea may be abandoned or passed on to another team to make into a viable business.

    As you say, technology makes that easier and easier.

    These teams will transcend borders and may call for a new way to structure business legally.

    Many of the companies I deal with will never reach $1M in revenue and they are very happy with that. My hope is that they embrace their size and focus on running a business that works for them.

    Reply
  1. More Small Business Discussion « Your Effortless Business

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