As Americans, we tend to favor large sizes—whether that be houses, meals, or vehicles. But when it comes to running a business, there’s actually a pretty compelling case for keeping your operations small.
Now don’t go thinking that a small business equates to small earnings. No, no, no. Get that association out of your head right now, because as we’ll illustrate later on in the article, there are plenty of small businesses that are highly profitable—to the point that they financially outperform companies of a much larger size.
This article is all about re-imagining the way you think about small business, from disproving pervasive myths to exploring the various advantages of operating at a limited scale. Let’s begin by looking at some small businesses that are absolutely killing it so we can better understand their strategy for doing so.
The Big Players of Small Business
Have you ever heard of Consuela before? Most people haven’t, given that it’s a small company with only 20 people on staff.
Based in Austin, Consuela sells uniquely designed bags and accessories that are brightly colored and adorned with messages like, “Make Today Ridiculously Awesome!” Can you guess how much revenue the company made in 2019?
$12 million. Not bad for a company that’s less than 20 years old.
Incorporated in 2005 by Conni Reed, Consuela operates two brick-and-mortar stores in Austin along with an online shop. Their products are also sold by more than 800 retailers across the U.S.
Their secret to success? Creating stand out, one-of-a-kind designs that leave a lasting impression. It’s a look that Austin Woman columnist Deborah Hamilton-Lynne describes as a mashup between Coco Chanel, Tommy Bahama, and Betsey Johnson.
“There is no walking by an aqua floral bag adorned with bright-red straps without a second look,” Hamilton-Lynne writes. “Make no mistake: The combinations are intentional. The combinations are not mismatched. They are the physical embodiment of Conni Reed practicing the look she has trademarked—the art of the unmatched—a look Reed says has been imitated unsuccessfully because others ‘can’t get the art of the unmatched because it comes from within me.’”
Let’s take a look at another company in a completely different industry: Zingerman’s Delicatessen.
Located in Ann Arbor, Michigan, Zingerman’s is a funky corner market known for its generous deli sandwiches and specialty groceries. Established in 1982 by co-founders Ari Weinzweig and Paul Saginaw, it’s a favorite among locals and frequently has a line of customers out the door.
But what started out as a local food market run by two employees has since become a nationally renowned delicatessen. Today, Zingerman’s owns a “Community of Businesses” that include 10 different companies with a combined total of over 750 employees and more than $55 million in annual revenue. Pretty impressive, huh?
Let’s look at one last example before we move on: Queen of Snow Globes. This Australian company, started in 2012, turns a huge profit in the most unlikeliest of niches: custom-made snow globes.
“There was nobody making single custom pieces—everywhere I looked was either stock standard designs that were available in the thousands, or if you wanted custom, you had to order a minimum of 500 globes of the same design,” said founder Leah Andrews. “If I’d been listening to all the standard advice about minimum search volumes, I wouldn’t have bothered building the website.”
It’s a good thing she ended up ignoring that advice, because within six months of building her website, it was already ranking number one on the first page of Google.
Shortly afterward, she became inundated with orders—to the point where she couldn’t keep up and had to raise prices just to decrease the volume. Today, Queen of Snow Globes has expanded into large-scale quantity production and has created custom pieces for prestigious clients like Kurt Russell, Quentin Tarantino, Steve Martin, Channing Tatum, and Netflix.
Makes you see small business in a whole new light, doesn’t it?
Debunking Small Business Myths
Speaking of seeing small business in a whole new light, let’s take some time to debunk some common myths while we’re on the subject.
1. You Have to Do Everything Yourself
This is an easy lie to buy into, particularly when you’re first starting out and funds are limited. But the truth is, you don’t have to do everything yourself. In fact, there are certain tasks you shouldn’t do yourself.
Take bookkeeping, for example. It’s a complex field by anyone’s standards, as evidenced by the fact that it typically takes some type of formal education or training to master.
It would be absurd then to expect that you, a small business owner with presumably no background in accounting, can proficiently do your own bookkeeping. And yet, people attempt to manage their own bookkeeping all the time (oftentimes with disastrous results).
Little do they know that hiring a professional is a lot cheaper (and faster!) than doing it themselves. Virtual accounting firms like ours, for example, offer small business bookkeeping for as low as $199/mo.
You can take this same concept and apply it to multiple scenarios. Let’s say you do have a background in accounting, but have zero experience with advertising. Ok, so then manage your own bookkeeping if you want and outsource your advertising to an agency.
2. Success is Measured in Sales Volume
A lot of people assume that just because a company is bigger and sells more products, that means they’re more successful. But that’s not necessarily true.
For example, let’s say Company A made $15 million in revenue last year. Meanwhile, Company B made considerably less at $10 million.
After subtracting all their costs of goods sold (COGS), Company A is left with a total profit of $3 million. Company B, on the other hand, had significantly lower COGS and is therefore left with a total profit of $5 million.
Which company performed better?
Keep this example top of mind whenever you’re feeling intimidated by a bigger company with a higher sales volume.
3. You Need to Have Fancy Tools to Keep Up With the Big Guys
Unless you’re running a tech company, chances are you don’t need the latest-and-greatest equipment in order to succeed in your field.
Sometimes we’ll read an article about a specific tool that a major company uses and become convinced that it holds the secret to success. Don’t fall into that trap.
“You don’t need to have the fancy tools to START a business, nor do you need them to grow one,” marketing agency The Quirky Pineapple writes. “Each stage requires different tools and systems. Find what works best for you, your business, your workflows, and your clients.”
Advantages of Keeping Your Business Small
Now let’s look at the various ways in which maintaining a small operation can play to your advantage.
1. You Can Retain Ownership
If your goal is to build a $200 million enterprise, you’re probably going to need the help of an investor. But it’s important to ask yourself how much you’re willing to give up in exchange for venture capital.
If you’re not careful, you could very well wake up one day as a minority shareholder in your own company, feeling less like a founder and more like an employee. But if you set your sights a bit lower, say by building a $2 million company instead of a $200 million enterprise, you may not need outside funding and can therefore keep all the shares to yourself.
2. Fewer People to Manage
Sometimes less is more, and that’s certainly the case when it comes to managing people.
Think about it: a $200 million company would probably require at least 1,000 employees, whereas a $2 million business could probably get by with just 10.
Imagine how carefully you would select each team member and how much you would invest in every one of them if your objective was to hire the 10 best workers you could find.
3. You Can Still Be Rich…ish
Admit it: you want to be rich. Don’t we all?
It’s ok; there’s nothing wrong with having a taste for the finer things in life. The good news is you don’t have to sacrifice the desire to be wealthy as a small business owner, for you can be both!
Now are you going to be as rich as, say, Warren Buffett? Probably not. But let’s be honest: Do you really need 84.6 billion dollars? What would you even do with that money if you had it?
Here’s an exercise for ya: Write down everything you want and calculate much it would cost per month to maintain. Then, multiply that figure by 12 to come up with an annual salary. Most people find that they don’t need nearly as much money as they thought they would in order to live the life of their dreams.
Consider this: a well-run business with $2 million in annual sales could easily churn out 25% in pre-tax earnings. That’s a gross salary of $500,000 per year! And don’t forget about all the various costs you can write off as legitimate business expenses, such as company vehicles and office equipment.
At the end of the day, you may not be as rich as you had hoped you would be, but there are a lot of other advantages to being a small business owner than just money.
4. You Can Set Up Shop Anywhere
Packing up your office and moving your company of five employees to another city or state? A pain in the ass, but doable.
Packing up your headquarters and moving your enterprise of 20,000 employees to another city or state? Not quite as feasible. And good luck finding a suitable location with enough infrastructure to support such a large operation.
5. You’ll Have More Free Time
If you’re like most people, you value your free time—whether that’s spent with family, watching TV, or going out for drinks.
Generally speaking, the bigger the company the more time you’ll spend managing it. Makes sense, given that founders of large corporations have thousands of employees to lead, numerous shareholders to appease, and press coverage to manage. Think about how much simpler and easier life would be if the stakes weren’t as high; if you had a modest $2 million business nobody paid much attention to instead of an international corporation?
6. Freedom to Do What You Love
One thing you’ll notice about giant corporations is that they have broad appeal. Think about how many people use Facebook, own an Apple iPhone, or eat at McDonald’s.
A huge perk to owning a small business is that you don’t have to cater to the masses. Think back to the snow globe company. It’s certainly not a big enough market to warrant having a physical store in every major city throughout the world, but the demand is just high enough to where it affords the business owner the opportunity to do what she loves while earning a respectable income.
With more sectors to choose from, you can spend your time doing something you’re truly passionate about.
If you enjoyed this article and want to explore this topic more in-depth, we highly recommend reading Small Giants by Bo Burlingham. This bestselling, award-winning classic shines a spotlight on unorthodox companies that have rejected the growth treadmill to focus on greatness instead. In fact, one of the examples we used earlier in this article, Zingerman’s Delicatessen, was taken directly from this book. It’s a worthwhile read if this is an avenue you want to explore further.