More from Tom! Scale, Scope, Size and Song?

Aloha, and mahalo for reading Talking Story! Welcome to our August Ho‘olaule‘a.

This is Part Three of my interview with Tom Ehrenfeld, business journalist, and author of The Start Up Garden, How Growing a Business Grows You.
Part One. Part Two.

Rosa:

Tom what do you see as the definite advantages of the small business owner? How do they have an edge? What kind of opportunities do they have that they themselves tend to miss seeing?

Tom:

I think that small business owners have the advantage of being closer to the market, closer to the customer, than large companies. This is a truism that will probably always remain so. I think the issue here is tied to the founder (or founder’s spirit)’s presence in the company. Many businesses are launched by charismatic individuals (or teams) who are intimate with a product, a service, a market niche; and the business thrives because they worry that field like a dog with a bone. Even as the business grows, it remains vibrant so long as it stays connected and delivers what that customer wants, even as tools and trends and so many things change.

But again, I think the issue goes back to what I discussed earlier, which is the need for small business owners to take a multi-faceted approach to the business. They need to keep it all together in their heads, or better yet, in the formal systems that they can access and share with the people in the business. These can be simple financial tools, the development of a simple metric for success (did we ship X number of gallons of ice cream this week? Are we converting X number of calls into real sales?), and a basic recap of how the business is doing in the market, in the public eye, with feedback from customers.

The key idea to me about the blurring of small and large business has to do with the idea of business metabolism—the rate at which the venture eats, breathes, grows, evolves. While most companies still live in the world of Newtonian physics, meaning they are humble and manageable and predictable, thank you very much, I would concede that several recent trends qualify more companies to behave out of the ordinary—the quantum world of business I suppose.

In fact, I wrote about the changing notions of scale, scope and size in this article for the Industry Standard several years ago. I wrote the piece at a time of great hype about the promise of the Internet and the froth of the bubble economy. People believed that the spread of web would radically change how companies did business, while the excesses of the public market persuaded hordes of crowds that making a big score by forming a quick company was child’s play.

These assumptions were pretty much proven false.

But the residue of Internet excess is not such a bad thing. Recently I wrote about Fast Company on the 1800ceoread blog, pointing out that the magazine represented a way that people felt about business—and in some ways I believe that individuals continue to have an optimistic approach towards entrepreneurship. They see it as a place to build and realize their dreams, and they are more tempered and deliberate about it.

Rosa:

The image of dozens of independent small business owners lining every town’s Main Street USA remains a very compelling picture to so many of us. Do you think there is any possibility that small business will again triumph one day over the big box retailers and other corporate giants of business enterprise? Or is there no looking back?

Tom:

I think that there’s always going to be a natural edge to the big players, one that only accrues over time. Who can beat Wal-Mart at their game? Nobody. And even though the company is encountering hiccups, it’s clear that no small shop can compete on their terms, plain and simple. Same with, say, Amazon. They won the war, and nobody has figured out how to deliver books and CDs to customers with the same relentless logic that Amazon has. I think that small retailers and vendors will simply have to learn how to compete on other terms. What those are remains to be seen.

Take the field of bookselling, which is near and dear to my heart. I want so badly for the independents to win back some share from Amazon and the chains. But this is a brutal brutal battle and even the best of the field are falling. In my hometown of Cambridge, Wordsworth, which was in my opinion one of the great independent bookstores (no-nonsense, no coffee, nothing but great selection and discernment and a passion for books), closed last year and the city still hasn’t recovered. Some retailers will figure out the next generation of bookstore (or some combination of store that sells books and other stuff), but I haven’t seen it yet.

Rosa:

I know firsthand how easy it is for an entrepreneur to get swallowed up in their business, working longer and harder than they ever imagined they would, underestimating so much about it. Thus your first piece of advice in The Startup Garden—to work on your calling by defining what you want out of life—becomes even more critical. You have interviewed and spoken with so many different small business owners: Do you have any advice on how the entrepreneur can avoid being consumed by their business from the very beginning, or is it inevitable in the early stages?

Tom:

I think the best advice I can offer on this front is to avoid the danger of being consumed by your small business by not launching it. Getting a business started places enormous demands on you—your time, money, mind, and heart. I just don’t think you can serve two masters at once. So yes, it is inevitable, and I believe the best way to deal with this conflict is to prepare ahead of time to be fully prepared to give your all.

I also believe that businesses get started in many different ways. That it doesn’t matter all that much which activity, out of the myriad activities (developing your product/service, connecting with customers, mastering the business model, dealing with the myriad legal and physical logistics, etc.) you start with. Many people take their first steps by creating a product in the garage or kitchen table, and test it out with friends. Fine, good. Don’t quit the day job! Many individuals position themselves for sudden success (the proverbial overnight success that’s many years in the making) by learning the skills, creating the website, forming the bank account and legal entity and informal network of advisors and investors (!), all over a matter of time—and without quitting they day job until necessary. Some folks even run their business as a second job (though I wouldn’t recommend it.)

I’m sending these mixed messages because while I believe that running the business requires an enormous commitment, I also believe you can and should get started in an iterative, adaptive, experimental way. Take small steps that won’t break you if they fail. Limit your exposure. Know your song well before you start singing. And be prepared to get big fast when it is time.

We wrap up our interview with Tom tomorrow: have you purchased your own copy of The Startup Garden yet? Don’t miss your chance to start your own conversation with Tom, asking him the questions the book may have brought to mind for you.

Buy Tom’s book on Amazon or on 1-800-Ceo-Read.