May 5, 2010

In life, of course, there are consequences for the decisions we make. And so it is in business, too – and specifically in small business, where growth and evolution can bring surprising (and sometimes undesirable) consequences.

In fact, what matters most to small business owners changes dramatically as their companies evolve from very small entities (fewer than 10 employees) to sizable businesses (approaching 100 employees or more), according to a recent study. Here’s what I mean:

* As the business grows larger, personal freedom and maintaining work-life balance—often the key reasons for starting a company—decline as what matters most in running a business.

* On the other hand, creating opportunities for others—an unexpected pleasure of running a growing business—increases in importance, finds the study, The Guardian Life Index: What Matters Most to America's Small Business Owners.

* Maintaining productivity becomes increasingly difficult for small business owners as the size of their company grows: Businesses of 2-9 employees tend to revolve around the owner and typically generate far higher revenues per employee than those with 50-99 employees—between 100 and 400 percent higher on average, according to The Guardian Life Index.

* At the same time, expanding the business becomes a more dominant focus of small business owners at larger firms: Among owners of companies with 50-99 employees, 53 percent say they are planning to expand their business.

* Meanwhile, at the other end of the spectrum, 58 percent of owners of companies with fewer than 10 employees say they are just trying to maintain business as usual.

"Growth unleashes immense opportunities and challenges for small business owners," says Mark D. Wolf, director of The Guardian Life Small Business Research Institute. "As companies move beyond a small, tight-knit team and become larger, more complex organizations, they increasingly look beyond their own expertise for information, operational support, and professional guidance."

What’s more, the following trends emerge as small businesses grow larger:

• The importance of the management team and employees rises, including the need to adopt effective practices for finding, motivating, and retaining good employees.
• Professional services advisors, such as accountants, lawyers, financial advisers, and insurance agents, increase in value.
• There is a growing focus on the disciplines of professional management, with an intensifying interest in improving productivity and stimulating business innovation.
• The business increasingly begins to shift its focus outward. In particular, the small business owner places greater value on membership in—and information from—professional associations, and the value and importance of the company's website rises.

I particularly like the way the study groups growing small businesses into four distinct categories, based on the number of employees as well as the shifting focus, needs, and priorities of small business owners:

1. 2-9 employees. The smallest business entity, often consisting of the principal and a small, dedicated support staff. The focus is on the principal.
2. 10-24 employees. At this small business growth stage, an organizational structure exists but is informal, collaborative and collegial. The focus is on the business.
3. 25-49 employees. The enterprise is beginning to look like a formal corporation but lacks the resources for rigid departmentalization. The focus is on the team.
4. 50-99 employees. The business has grown to a size that resembles a larger corporate entity but with fewer resources. The focus is on the organization.

"These categories provide a... way of understanding what matters most to small business owners at different stages of business development," said John Krubski, the researcher who designed the methodology and conducted the study underpinning The Guardian Life Index. "Regardless of the type of industry, a clear progression takes place—as employee base increases—across a wide spectrum of management and professional development issues."

So how about you? Have you experienced a shift in priorities with your growing business? Are your priorities and focus shifting as your company grows?

Photo credit: jronaldlee

Related Topics

• Marketing

Related keywords

Ann Handley, Article, decision-making, growth strategies, Duct Tape Marketing