One of my favorite small-business bloggers, Anita Campbell, wrote recently that the key to being successful in your small business start-up is to be very careful with how you spend money, even if it means growing very slowly. She has some no-lose advice, including being picky about adding products and features, partnerships and employees; acting like the small company you are without faking the accouterments that go with being big; looking for discounts before you buy so much as a box of paper clips; and of course focusing on growing sales.
It's hard to argue with motherhood and apple pie, and I can think of plenty of examples that prove her point. One business I know quite a bit about, a promotional products company, grew very fast with venture capital backing but quickly found itself in trouble when expenses got too high and sales didn't grow fast enough. Fortunately, the owner was a very tough guy. He got the VCs out, downsized, and grew organically and survived. But still, I think are some other things to consider.
About Growing Slowly: The slower you grow, the less chance you have of wasting resources. Businesses that expand too quickly make more mistakes, and in the first few years of a business one too many mistakes can be fatal. Just one problem about being in the slow lane: to quote John Maynard Keynes slightly out of context, "This long run is a misleading guide to current affairs...In the long run we are all dead." Many startups these days are owned by Baby Boomers (like me) who launch a business after a corporate career. If you're 40-60 years old, the long run is indeed no longer that long. The sand is running out of the hourglass and you can't ignore either it or the mortgage or the tuition. If you're going to gamble on entrepreneurship rather than have a real job, you should think about how fast/slow you need to to get your business to the point where it meets your needs.
About Being Stingy. Anita writes, "Of every expenditure, I would ask myself:Â how many hours would I have to work to pay for this expense? That one question brings clarity." I do that, too. In my catering business, I have often asked myself how many cappuccinos I will have to sell to make back that marketing expense. So again, motherhood and apple pie. On the other hand I sometimes wonder whether I am giving in to "scarcity thinking" when I go down that road. My coach teaches me to focus on creating an abundance of what I want, not just having enough to get by. So if I believe in a marketing concept or a new product, and that means investment, do I really want to calculate having to sell 4,265 lattes to pay for it? Maybe, but I'm not sure. (P.S. Tuition this year is costing me 11,250 lattes.)
About Acting Small: Anita writes, "Instead of the snazziest website possible, have a more informal website or blog. " Keeping it simple is definitely good advice, as is not pretending to be something you're not. But do customers want to work with a business they know is small and fragile? Isn't that risky for the customer? What if you or your business gets hit by the proverbial bus? I like my clients to feel that my business is big enough to never let them down, and it is.
Where are you on the small/big, fast/slow, penny-pincher/big spender spectrum?
I agree with slow expansion being an efficient use of limited resources, however one needs to evaluate the growth potential of their venture based on time cost and opportunity cost. As a small business owner, I have learned the value of getting good buys, but also learning to delegate responsibility. It’s a process/shift that is inevitable if you are going to spend time working ON your business, rather than working IN your business. That is how to grow a company, in my humble opinion.
I believe in starting small and slowly, more over when you are bootstrapping the business process on your own. Taking care of expenses and keeping good cash flow will always keep your business healthy and going on.
BTW, thanks for the great advices!