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The Drawbacks And Upsides Of Being A Small Business

POST WRITTEN BY
Robert Brill

I started my company in 2013. It was bootstrapped with risk, opportunity costs, emotional support from family and friends, and a decade's worth of savings. In 2019, the company was ranked No. 155 on the Inc. 5000 list of fastest-growing companies in the U.S.

At this juncture in the development of my company, with six years of operating as a small business, I regularly reflect on what I see as the downsides and upsides to owning a small company. Here’s what I’ve come up with so far, along with some advice on how to deal with each. Ask me again in a couple of years.

Drawback: Bleeding Edge Challenges

Being the owner of my company puts the pressure on me to produce and operate at a level I don’t have precedence for. I’ve worn many hats in my career, and I could say my previous roles prepared me on one level for where I am today. However, the reality is that I am a first-time CEO, and I feel every bit of that fact daily.

Recently, I was on a call where we discussed the concept of mastery, which breaks down into three categories: technical (knowledge of a craft), business (knowledge of how to profitably build a group to do the thing you are selling) and leadership (knowledge of how to work with large groups of people to achieve a cohesive goal). Every person has some level of understanding in each of these areas, but no one is a master at everything all the time.

The technical mastery of your industry is heavily informed and deployed by your team, and it is driven by you. Yet as a first-time CEO, you may feel that you are on the bleeding edge of your knowledge with regard to business and leadership. To solve for this, hire great people, and make an effort to spend time surrounded by entrepreneurs who are doing bigger things than you. By talking to them about their growing pains, you can gain insights that help you become a better businessperson and CEO.

Drawback: No Massive Budgets

Often, massive companies are bankrolled by venture funding or investment firms. In some cases, those businesses blow out revenue with less of a goal of being profitable and more of a goal for selling, in which case getting a multiple on revenue is much more valuable for a long-term sale than short-term profits. These companies use investments to fund growth in the form of strategic acquisitions, staff hiring and investment in technology that gives them a leg up on competitors. With more investment comes the opportunity to grow quickly and even operate at a loss in the short term with the goal of a big exit (see Uber and its recent $1 billion quarterly loss).

Being a bootstrapped company means you have to be profitable. Technology or human capital expansions can only happen when there is a direct business case for it. Hire based on existing work or the desire to grow. Onboard new technologies when they are mandatory for your business. Take risks calculated by the time it takes for those risks to pay out and the opportunity cost if those risks aren’t taken. Be frugal with your dough, and make investments when the outcome is all but certain.

Upside: Nimbleness

We don’t have boards, shareholders or committees that can slow down decision-making processes. Instead, we have groups of on-the-ground experts who are hands on keyboard, activating ad campaigns and communicating with clients. I find this setup really efficient. It means we can react to conditions faster than larger companies and forgo bureaucratic challenges.

Change can be implemented quickly in a small business. The result is the ability to identify marketplace opportunities and act on them. It is because of this nimbleness that you'll have the ability to restructure your team to meet client and project needs, bring on new partners without a board vote and quickly make informed decisions on business investments. If a client says you need tech and the budget supports it, you can move forward.

Upside: Control

I am the sole owner of my business. This means I control its financials, operations and strategic direction. Honestly, sometimes it’s overwhelming. There are endless decisions to be made, and it’s challenging not to take losses personally. For many people, those pressures would be enough to give away some control. For me, control is an upside.

For my personal comfort, I choose to take limited financial risks. By not overextending the business, I get to build a repository of fiscal leverage for future opportunities. The investments we make are in people first and technology second.

It’s powerful to be able to control which partnerships you enter, clients you serve, technologies you utilize and marketing efforts you implement. This means you can make sure the people you spend the most time with, outside of your day-to-day team, are trusted partners, experts and good people.

Being in full control of the direction of your company, you can take pride in it being a direct reflection of your name, goals and vision.

Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?