Does size trump all in business?
Is being the biggest really better?
Or, is there more to the story ?
With the emergence of bountiful blossoms, I couldn’t help but take a cheeky twist for this month’s blog. Another piece I started 2 years ago and since, has been languishing in the electronic pile of unfinished work. Enjoy!
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The race to biggest…
While few would admit, many of us may secretly relish owning the biggest house on the block or driving the biggest car. Within our workplaces, props are given to those who manage the largest number of staff. Companies are measured and matched based on having the most of something: number of customers, staff, offices, locations, sales, and market share.
This leads me to think…
Why are we so obsessed with size?
Does having the biggest really mean better?
There’s no disputing that business is largely driven by men. So perhaps the emphasis on size, over other qualities, is another symbolic phallic competition. Who knows?
Tempted, but not duped…
Luckily, as a female entrepreneur and business owner, having the biggest was never top on my agenda. I won’t go as far to say I wasn’t tempted to enter the size competition. After all, competition is an integral part of business and attracts people that are excited by it. However tempted, I knew that by placing my focus on other areas, and not solely on size, is what saved my business during The Great Recession and has enabled it to endure.
Here are 3 things I believe are more important than size.
Take what works for you, leave what doesn’t.
It’s not how big you are, it’s about:
How deep you go
When setting up my retail business, I had two locations to choose from. They were virtually opposite in every way. One was a high end tourist destination with expensive rents, New York City weekend shoppers, and typically described as quaint. The other location was an artistic urban center with low rents and relied on local shoppers who were ‘brave’ enough to come to the area. Despite its reputation, it was a stunningly picturesque city treasured by loyalists.
The choice between the two locations boiled down to impact, or what I call ‘going deep.’ Meaning, how deeply would my customers accept and support our cause. As the first independently owned, for profit, fair trade retailer in our state, we had many challenges. Like any other for profit business, we (all of us that made the business a success!) relied on sales to survive. But unlike traditional businesses, we also had a mission. We sought to raise awareness about how our spending affects those living in poverty.
We decided to open our store in the artist urban center and go ‘deep.’ We believed that by having a base of repeat customers, as opposed to one-off seasonal shoppers, would deepen our customer’s connection to fair trade. Taking a deep approach meant putting our trust in the hearts of our customers, rather than the dreams of bigger sales.
Going deep is not easy, nor the fastest route to become the biggest.
Taking a deep, versus a wide approach, is not for every business. Ultimately it depends on your business model and your long term objectives. For my business, it allowed us to become a thread in the rich tapestry of our community. We built a business and brand that included our customers, suppliers, as well as our, local and global community. This meant remembering names and purchases year after year, building personal relationships that extended beyond the store, participating in community events, hosting school groups, volunteering on economic development groups, including customers and producers in marketing materials, and sharing our space with those who shared our values.
As a result, our success became everyone’s success. Going deep rewarded us with a cavernous well of loyal supporters—from millionaires passing through on their way to the exclusive Fishers Island, to compassionate homeless living in the streets of our gritty city, to ‘guardian angels’ that brought carloads of co-workers in to shop.
In business, going deep may have different meanings. It can refer to the level of engagement with staff, customers, suppliers, stakeholders, or community. However, the common thread is the same.
Going deep puts people before profit in order to increase long term success.
How fast you grow
There’s a common belief that growing fast is a ‘good’ thing for business. Putting phallic jokes aside; growing too fast is one of the safest ways to go out of business! Fast growth might give us those warm fuzzy feelings of security. And, knowing that we’re the hottest flavor of the month may make us feel valued and loved by our customers. But like many things in in life, growth is a double edged sword. Growth can be both good and bad for business.
Having the right growth—that your business can handle—is key!
Unfortunately, there is a misconception that if you’re growing fast you’ll have lots of cash rolling in. Sorry if I sound a bit like Julie Andrews with a spoonful of medicine, but! The truth is: growth costs money. So if your business is having a major growth spurt, then it’s highly likely you’re desperate for cash. Not having enough cash leaves little money to cover day-to-day expenses, buy inventory, or invest in infrastructure—which all require regular injections of cash.
Lack of cash is only one of many challenges for fast growing businesses. Brian Hamilton’s Forbes article Watch Out For The Five Hazards Of Growing Too Quickly gives a snapshot of other things to consider.
The challenge for any business owner is to create and manage sustained growth. Having the right amount of growth allows you to, not only to stay physically and mentally at the top of your game, but in the game.
How much you keep
As an entrepreneur I tend to be overly optimistic and am always looking forward to the next big thing. So this is a lesson that I learned the hard way. Before the 2008 recession hit, our sales were growing exponentially. Feeling confident, we moved into a space triple our original store. With 1400 square feet to fill, I went on an inventory buying frenzy. While I kept an eye on costs, to be honest, it wasn’t my top priority. I was of the mindset that things would continue to be good.
Then on September 24th 2008, George Bush announced the US was now in a recession. The impact of his words took another six months to penetrate my ego-driven overly optimistic thick skull. When they did, we were in the middle of the sink or swim season (late Spring). Seeing the drop in our numbers, a sick, sinking feeling knocked me back into reality.
And that’s when I learned, that sales mean nothing if you spend without a plan.
Letting go of my pride, I fully opened my ears and sought advice from experienced business friends, mentors and, most importantly, my customers. Like a sponge, I listened, observed, and took to heart what I learned. Digging deep into our numbers, I analyzed each product’s performance, purchase ratios, turn-over ratios, price per square foot, average customer purchase, conversion ratios.
You get the picture.
Before the recession, like a lot of other businesses, we had excess to survive a short drought. Riding on a wave of optimism, there was little impetus to change. After the recession however, the business landscaped shifted. Owning a small business was more of a walk on a tight rope.
Therefore, successfully building and keeping a wide financial safety net is imperative.
The bottom line.
Yes, size is important, but it’s not the whole story.
The race to biggest is one of safest ways out of the game!
Finding the right depth, managing growth and having a wide safety net will increase your chances of long term success and keep you in the game.
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