Small is beautiful

If, like me, you’re an entrepreneur or small business owner, pick up a copy of the latest issue of Inc. magazine. It contains a chapter from Bo Burlingham’s new book entitled “Small Giants” which is all about a different definition of success for small businesses. I’ve spent a lot of time thinking about this very topic since I started my first company when I was 22 (that’s getting to be a long time ago!). The most common mistake I see in entrepreneurs is that they allow somebody else to define success for them, instead of defining it for themselves. Some of the most unhappy people I know are ones worth tens or even hundreds of millions of dollars. They regularly grace the pages of the Wall Street Journal. Some of the happiest people I know have built smallish, sustainable businesses around a passion that they have, without killing their personal happiness along the way.

All too often I hear venture capitalists or analysts or other pundits dismiss small companies (sometimes including Homestead, although by most definitions we are no longer a small business) as “lifestyle businesses” or “insignificant” or “dinky” or “inconsequential.” Inconsequential to whom? Maybe to the institutional Wall Street investors who care more about a company’s P&L (Profit and Loss statement, see my definition here) than what product they make, or how they treat their employees, or whether they are devastating the environment. But it’s not inconsequential to that company’s employees, or their suppliers, or their customers. And not to the restaurants frequented by the company’s employees, or the hotels and airlines used by the company’s visiting partners or prospective employees. And not to the company’s community or neighborhood school or the local beach that’s clean, assuming the company is actively involved in giving back to the community, as many small businesses are (click here to learn more about a cool organization I’m involved with, called Entrepreneur’s Foundation, which encourages start up companies to ingrain community-values into their companies from the ground up).

Small businesses aren’t just a cool way for business owners to have a nice lifestyle. Small businesses and the people who run them more often than not work their butts off to provide real jobs, income, and economic stimulation for our economy. Companies with under 100 employees employ 90% of the United States work force (excluding the government), generate a huge percentage of the GNP, and provide more than their share of private donations to our community. Doctors, lawyers, contractors, marketing consultants, venture capitalists (yes, even though they rarely invest in their own kind), and bankers are almost all small businesses, along with the more traditional trade and service industries. I think it’s time that we stopped thinking of small businesses as the second class citizens of our economy and started investing in them, supporting them, and giving them the same attention as our society does to big business. That means recognizing the ones that are great, and giving them praise as vehicles for social change, technical innovation, wealth creation, etc. It also means holding them under the microscope, just like their big brothers, for environmental irresponsibility, employee mistreatment, greed, unfair government influence, etc. I’m pretty confident that most will come out smelling pretty good compared to the Walmarts, Enrons and WorldCom’s of the world, but there should be more that aspire to be as great as the Intuits, Nordstroms and Berkeshire Hathaways.

Comments

[Brandon Fluharty]

I wholeheartedly agree with this blog. You are right on. Small Businesses who use an enlightened and ethical approach deserve to be treated with more respect. Obviously each business strives to make more than they expense, but the bottom line for investors should not be just a P & L statement. I would love to see the day when a venture captitalist firm dedicates soely to building relationships with "enlightened" companies (those who can show they respect their employees, who strive more for fulfilling lives and providing quality, and to make money...but not as a sacrifice to doing things slow and right). Can they exist??? Does anybody have recommendations where one could seek out Investment, Loans, Grants who champion these qualities???

[adria]

I couldn't agree with you more, small businesses are more human-centered business models than lifesucking behomoths. This a great blog, a perfect example of what a CEO's blog should look like...very inspiring.

[Mcgill]

Small business paritcularly those which people own and hire low wage employees don't have the human element when it comes to work. They end up working more than scheduled hours. You never know and you end up working nearly 16 hours a day.