You know the expression "good things come in small packages." The same sentiment can apply to small businesses too. Entrepreneurs don't have to set their sights on building a mega-million-dollar business to enjoy a highly satisfying and lucrative entrepreneurial career.
Financially speaking, research has shown that small-business owners enjoy an average net worth that is three times that of their salaried counterparts. Business owners also tend to out-perform salaried employees in terms of higher annual incomes, savings, and stock portfolios.
Parents, college career counselors, and students should also take note that women are more likely to achieve $100,000-plus annual incomes faster through business ownership than average professional careers in law or medicine.
Even though business ownership offers considerable potential for financial reward, entrepreneurs still talk to me about their overriding desire to control their work destiny. They don't want to work 18-hour days or feel chained to inflexible schedules that conflict with family and leisure interests. Their attraction to business ownership is more about creative pursuits and career flexibility than monetary gain.
Of course, just because an organization is small doesn't mean that it will be stress-free or less vulnerable to business problems.
Countering the risk of falling behind
"Adversity Quotient: Turning Obstacles into Opportunities" is one of my favorite mindset development books. The book's author, Paul Stoltz, refers to individuals who are always taking energetic steps forward as "climbers." Individuals who are content to hang out in places of comfort are called "campers."
Stoltz warns that whenever individuals and businesses become complacent, they don't just stay in the same competitive position. They actually fall behind. It makes sense too. Because small-business climbers are almost always moving onward and upward in their quest for profitable customers, eventually they will surpass the campers.
But it is possible to run a "no-growth" or "slow-growth" enterprise and not be considered an unproductive camper in the small-business community. A slow-growing business doesn't have to be a weak business, provided the owner takes proactive steps to minimize risk and maximize every minute of every workday.
Here are five tips for keeping a slow-growing business efficient and healthy.
1. Define success in quantitative terms. The problem with starting a business is that sometimes, in the quest for new work-life objectives, owners don't always set measurable goals. After your business is profitable, however, you need to think about the next operating milestone: standard benefits and compensation for company founders and staff members.
This means the business is able to consistently generate enough income to pay fair market salaries, and cover payroll taxes, health-insurance premiums, business liability insurance, and annual contributions to a Simple IRA or other small-business retirement savings programs. Entrepreneurs who are single or don't have any other sources of income should add disability insurance to this list.
Simply stated, a business should be big enough to take care of the founder and support staff. Keep climbing until you reach this target!
2. Reduce dependence on any single customer or partner. Even the best-performing companies are vulnerable to fast failure if their revenues or profits are tied to one customer, one distributor, or one business partnership. With each passing year in business, dependencies should shrink to the point where no single relationship loss can put your company out of business.
3. Improve largest-customer profitability. Ideally, a small company's largest customers should be its most profitable customers. It is surprising how many business owners accept the reverse situation. Entrepreneurs who want to stay small and productive must favor customers who value their work and are willing to pay top dollar for it.
4. Identify backup support staff. Wouldn't it be nice if all customers presented new orders in an orderly, manageable way? As there aren't many foolproof ways to prevent sudden surges in customer demand, small-business owners have to take steps to protect their 9-to-5 work day.
One strategy is to identify project consultants or part-time support help for every key function in your business. For example, a company that provides research and grant writing services for nonprofit organizations can develop sub-contractor relationships with part-time researchers, writers, or editors. The trick is to test contractors out long before crunch time.
5. Reduce time allocated to administrative tasks. If you want to get more revenues and profits out of each workday, an easy fix is to reduce the amount of time spent on administration. If you think about it, you don't pay your bills, your customers do. However, small-business owners put aside money-making activities for less important administrative tasks. How often do they do this? Every single day!
My solution is to push all billing, mail opening, office supply store trips, and miscellaneous correspondence to just one day a week, preferably Friday afternoon. By eliminating time-consuming interruptions, you'll get more out of the rest of the week.
What is the secret to owning a slow-growing business to preserve time for family, friends, vacations, and fun? I think it all comes down to focusing your energy on this small list of business-enhancing initiatives and doing them really well.
About the author Susan Schreter is a Seattle-area investment banker and venture-funding expert serving startup entrepreneurs and fast-growth company executives. She also teaches business financing and entrepreneurship at business schools, angel forums, and microfinance organizations in the United States and internationally. Write to Susan at susan@takecommand.org.
Some of you who read this post realize that I have fought and, I hope, beaten a diagnosis of terminal cancer.
