What better time to point out the advantages of being a small design firm than when the industry is experiencing a contraction. All the more so since we have this strange obsession with growth, captured in phrases like “if you aren’t growing, you’re dying.” You can’t fit deep thinking on a bumper sticker, and that looks like a bumper sticker to me.
Part of this comes from an economic reality in which we expect publicly traded companies to not merely be as profitable this quarter as last quarter, but the earnings must be growing at a higher rate.
No, you’re not a publicly traded company and shareholder expectations are not a factor, except for your own expectations. Those should revolve around a great work/life balance, doing honest work, and making good money. How that happens is secondary, and if you play your cards right, it’s quite possible to do that as a smaller firm. In fact, you may find it easier to accomplish as a smaller firm. That’s the introduction to the many advantages of being just that: smaller rather than larger.
A Dozen Reasons Why Small Can Be Good
Being small doesn’t receive the sort of positive accolades that it should. Here are my reasons for at least considering it as a viable option:
- Thinking doesn’t require scaling like doing does. Most firms, when you really look at it, do less strategy than implementation. To get a fair chance at the larger, juicier implementation work, you’ll be forced to bulk up the team so that the bench is deep and the capacity is real. But if you’re primarily selling thinking rather than doing, clients don’t care as much about how big you are.
- This is a young person’s business, as much as it shouldn’t be. Or at least the doing part is. So extrapolating from the previous point, as you get older and swing away from the implementation to the strategy, your chances of doing this successfully are much higher. What typically nudges you in this direction is a weariness with managing people, whether or not you were good at it. Being smaller forces a crisp positioning around naked thinking, which is a positioning that is far easier to maintain as you age.
- You can adapt to a changing marketplace more easily. Similar to the difference between turning a tanker or a rowboat, you can react quicker. And make more mistakes, which alone is a significant advantage. Experimenting in a larger firm is far more dangerous.
- You can be more in touch with employees rather than focusing on a middle management layer. All that time spent hiring and molding the right individuals to manage under you can be spent directly with employees on the front lines. You’ll have fewer high priced employees, too.
- You can be more selective in hiring new employees. Not much more needs to be said about that, except to note that you’ll need fewer employees from the same available pool of talent.
- You’ll have fewer management challenges with fewer doers, since most of these challenges come from the implementation side of your business. There will be less “solving the same problems every day” when you go to work, and that usually translates into a more sustainable relationship with your firm.
- You can’t live in denial about any single bad employee, either. You’re in direct contact with all of them, you can see and evaluate their work, and there’s a greater demand for teamwork. There’s no hiding in smaller companies, and if your smaller firm has a good culture, it’ll spit the bad ones out like a motorcyclist spits out a bug.
- Culture is easier to maintain in a smaller firm. The more direct relationship you have with employees simplifies communication, increases your opportunities to influence it, and makes it easier to see when it’s off-track.
- You can be more selective when choosing which clients to work with. Your thought leadership activities will bring the same number of opportunities your way, regardless of whether you’re a small or large firm. But since your pipeline isn’t as large, you’ll have the luxury of being more selective when deciding if any given client will allow you to make money and do effective work on their behalf.
- You can’t live in denial about any single bad client. Unlike a large firm where you can use bad clients as training opportunities for newer employees (and lose your shirt in the process), they aren’t easily swept out of sight in a smaller firm. Every client is present and influential, and you’ll be fully aware of their impact. Whether or not you have the courage to act on it is something else altogether, but at least the problem will be staring you in the face.
- You can be closer to the actual work of your firm given the fewer management responsibilities that accompany ownership. Being the CFO, for instance, isn’t as big a job. So if you’ve nailed that and have extra time, you can work on projects for clients, or manage employees more closely, or just monitor trends in the firm. Since most firms add single individuals at a time (rather than hiring a dozen new people all at once), it’s easy for principals to not even notice the slow evolution of their own role, as they (should) move from doing to managing. All this to point out that the reverse is true, too—growth is mainly about shaping your own role as a principal, and there’s more flexibility if your firm is smaller.
- There is less financial risk, simply because all of your obligations are smaller, whether that’s a credit line, equipment lease, personal guarantee for a facility, or a smaller average accounts receivable balance. Better yet, pay cash for all your growth, which makes even more sense. The more people you have, the bigger the numbers, and the bigger the risk.
I don’t think we fully evaluate the dangers of growing too fast or being too big. Growing is dangerous enough—growing too fast is just suicidal. So whatever you do, recognize that growth never solved anything, particularly if things aren’t quite right at the current size. It’s always better to get it right at the current size, and then make a more considered decision about growth. If nothing else, you might be better prepared to face the implications of that decision to grow.
Small Firm Too Small For a Business Manager?
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