Growing Big vs Staying Small

Build the business that you want to run.

Some business owners want a private jet. Others just want to replace the old Jetta they’ve had since high school.

Some business owners want to oversee thousands of employees across dozens of global locations. Others are content forever remaining a one-person show in a one-horse town.

Some business owners want the corner office from a prestigious downtown address. Others are just fine working from their kitchen table.

Some entrepreneurs want to work forever on difficult and challenging problems. Others just want to get off the hamster wheel ASAP and never have to work again (yes, this was me).

Now don’t get me wrong, I’m a staunch capitalist, but I’m also a bit of an anti-consumption minimalist. Therefore, I’ve always chosen to remain squarely in the SMB realm for my own companies. Even the tech startup I co-founded was, by startup standards, pretty small — and we knew we’d always be small, considered non-investable by venture capital firms.

Back when I ran my tax firm, my business clients were mostly small, too. The biggest company I ever represented on an IRS matter had somewhere around $25 million a year in revenue, if I recall correctly. When I was advising other tax firm owners, most of them were solo practitioners.

Small businesses are the backbone of the American economy. Small is good.

But I’ve seen the other side, too. I’ve participated in startup accelerator programs as a founder, been an angel investor, and advised a few tech startups that were founded by people with visions of BIG. These are the folks trying to build the proverbial billion-dollar unicorn company.

The world needs big, multi-national corporations, too. That’s how we get economies of scale, maximum efficiency of resource extraction and utilization, and most of the conveniences that make modern life so comfortable for the middle class.

In startup culture, there’s a “go big or go home” mentality that is quite pervasive. But since the vast majority of startups fail, I personally don’t believe it’s the correct mentality to have. And thankfully, in the current economic climate, many founders are having no choice but to bootstrap, so it’s causing a correction in thinking.

The reality is that the number of people that just want to work for themselves and earn a decent living vastly outnumber those that want to build unicorn companies. There are literally millions of us on the small side, compared to mere thousands on the big side.

So whether you’re just starting out on your entrepreneurial path, or you’ve been in business for many years, remember this: There is no mandate to take the maximum growth path. You can optimize for small, and that’s perfectly fine.

The important part is to build the business that YOU want to run. After all, you’re the one that has to run it.

Let’s take a look at the pros and cons of going big vs staying smol.

Venture Scale Startups

Pros:

1. Fame and Fortune: There’s something kind cool about being a household name and getting to attend fancy parties. But remember, money can’t buy happiness. Although, I guess it can buy a yacht, which is the same thing, right?

2. Impact and Reach: Change the world. Solve what Peter Diamandis calls “billion-people problems.” This hits in the feels.

3. Attracting Talent: Having more cash means you can lure in those genius minds. Brilliant people want to work for hard-charging people and companies. Big vision attracts top talent. The stock options don’t hurt, either.

4. Innovation and Growth: You'll be at the forefront of the industry, pushing boundaries like cats push plants off shelves. This is about being part of the history books (are books still a thing?).

Cons:

1. Ain’t No Party Like a Stress Party: Running a venture scale enterprise is kinda like juggling chainsaws… that are on fire.

2. Loss of Control, Loss of Touch: Over time, it’s possible to lose control of your own company. On top of that, over time you get further and further away from the actual work, and are forced to be a C-suite executive. If you prefer being hands-on with your work, this might start to suck.

3. Investor Pressure: Remember your family nagging you about being two hours late for Thanksgiving dinner those fourteen times? Yeah, venture capitalists are even worse.

4. Ruthless Competition: You’ll start to get "Game of Thrones" vibes, but without the cool soundtrack and overly attractive cast.

5. Bureaucratic Nightmare: So much red tape. So. Much. Red. Tape. Some of us are into that sort of thing (sez the guy that used to IRS thingies), but most people aren’t ready for this particular nightmare.

Small Business

Pros:

1. Personal Touch: You’ll know your customers by name, face, and smell. Yeah, some of them are going to have weird smells.

2. Flexibility: You can change direction on a dime. Get tired of doing oil changes? No worries, tomorrow you become a tire shop. No board meetings required!

3. Low Stress: No billion-dollar expectations here. Just good ol' fashioned entrepreneurship.

4. You're the Boss, Apple Sauce: Full control. Captain of your own ship. Just don’t hit that reef, please.

5. Community Connections: Local businesspeople are local heroes. You can be “five-mile famous”, as I’ve heard it called. Everybody knows you, you know everybody. It feels good to be part of the community.

Cons:

1. Limited Revenue: You might not be buying that yacht anytime soon. But from personal experience, I’ll tell you that a 9’ dinghy is pretty fun, too!

2. All Eggs, One Basket: Limited resources means limited revenue streams compared to a big company. Diversification's not really on the menu. This can become awko taco during economically disruptive events. I mean, wow, just imagine if something crazy happened, like, I dunno, a pandemic or something.

3. Tough to Attract Top Talent: Smaller business tends to mean smaller salaries, smaller benefits packages, and zero equity upside. Top talent will usually go seeking more lucrative offers. Some employees want prestige, too. Joe’s Tax Shack doesn’t look as good on a resume as PwC or KPMG.

4. Limited Impact: You’re small. You’re local. You’re not going to change the world. However! You can change a neighborhood, and some might argue that’s just as important. I know I can’t change the world for every fish in every ocean, but I can help make the water cleaner for a few fish in the Salish Sea.

5. Harder to Innovate: Trying new things is like playing Battleship blindfolded. I guess some people have the dexterity and mental mapping to correctly place those little pegs without seeing them, but it’s sure going to be harder. This goes back to the resource issue.

There you have it: Just a few of the pros and cons of going big versus going small. If this post felt biased in any way, then, well yeah, it was. Duh. I wrote it. Musk or Zuck would probably write the same post in the polar opposite way.

Before I go, I should add one more thing: Small is relative. Compared to the venture-scale, unicorn-chasing world, medium is also considered kinda small. But medium is a highly underrated option, and one that doesn’t really get talked about much.

Heck, the definition of “small” can actually be pretty damn big, as far as the SBA is concerned. The definition changes based on industry, so the cutoff can be up to about $40 million a year and up to 1500 employees for some industries. Not so small, eh? Just something to keep in mind.

In summary, I’ll repeat myself from earlier, and bold a different part. There is no mandate to take the maximum growth path. You can optimize for small, and that’s perfectly fine.