Success Drivers of Small Companies

Why, yes, as a matter of fact, some days it will feel like you're building these.

Why, yes, as a matter of fact, some days it will feel like you’re building these.

It’s interesting to think about why some small businesses succeed and some don’t. And why the ones that do succeed either plateau at a certain level, or, just keep growing until they become huge corporations.

Just what is the difference between small companies that fail, and ones that succeed? And further, among the companies that succeed, what’s the difference between those that plateau at a certain amount of revenue, and those that become corporations like Apple or McDonald’s? What are the success drivers of small companies in these instances?

Regarding the first question, for the difference between profitability and insolvency, sometimes it’s a matter of market demand for whatever product or service the company provides. Sometimes it’s a matter of adequate capital that’s available to fund the business. Sometimes it’s a matter of location. Sometimes it’s a matter of marketing. But, in our experience here, it’s usually a matter of how driven the principals of the business are in terms of making the business successful. Unless all the stars line up exactly, and you have the right product at the right time in the right location, and your business just takes off from Day 1, you’re going to have to work really hard to make your business successful. You’re going to have to sacrifice, and in so many ways – you won’t have friends because you’ll be working all the time, if you have a family, your family will resent you because you won’t be paying any attention to them, you won’t have any money because all of your money will be going towards growing the business, you won’t be sleeping much and you’ll be exhausted all the time, your physical health will be an afterthought, you’ll have high levels of stress and anxiety, and so forth.

Most people can’t hold up for very long in that sort of situation. They’re not mentally tough enough, and frankly, they don’t have the physical stamina to see it through. For most small businesses, the path to success is not a sprint, it’s a marathon. It takes years of tenacious work to make a business successful.

Okay, then, what about that second scenario? Of the businesses that do succeed, why do some end up as profitable with 10 employees and some end up as profitable, but the size of Microsoft or Wal-Mart? What are the success drivers of small companies that become very large companies? Why do some companies stay small?

Sometimes it’s some variation of the reasons that those small businesses didn’t make it, sometimes it’s the regulatory construct the company has to work within, sometimes it’s the fact that the company doesn’t have the managerial horsepower to successfully run a larger company, and sometimes it’s something else.

Mostly, however, it seems to be a matter of relative contentment. That is, how content the owner of the company is at any given stage of the company’s growth or success or fame. Some company owners want to be millionaires, and some want to be billionaires. Some companies want to own their market segment on a global basis (think Microsoft), and some just want to own it in the Tri-State Region. Some companies want to keep making the coolest stuff ever for decades (think Apple and Lockheed and Porsche), and some companies are ok with just making something astounding just once. Some company owners are not content unless they’re constantly rolling the dice on a new business venture (think Tesla), and some are pretty happy with just a couple of big successes. Some owners want to irrecoverably change the dynamics of the market they’re in (think Wal-Mart and McDonald’s), and they’re not going to stop until they accomplish that. Some owners love the business they’re in their whole lives (think Warren Buffett), and some of them get bored with it after a while.

And frankly, many of these business owners are happy simply to net, say, $100,000 a year, not have a boss, come and go as they please, and have three, five, ten employees. After working so hard to get the business profitable and stable, they’re perfectly okay with just maintaining the status quo for years, maybe even decades. And there’s nothing wrong with that at all.

Any guesses as to what sort of owner you would be?


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