How Big Should You Grow Your Business?

by Brian Acord

Every year over a half million new businesses are created in the United States. Many of these businesses are started by first-time entrepreneurs who have given considerable thought to issues like product offering, pricing, financing, etc. but very few entrepreneurs ask the question “How big should I grow my business?”

By default, the answer invariable becomes “as big as I can get it.” Unfortunately, many entrepreneurs do not consider the fact that different sized organizations require different organizational structures, contrasting leadership skills, and provide vastly different benefits and limitations. It is possible, then, for an entrepreneur to do everything right and still fail because the organization they are trying to start is the wrong size for their personality and skills.

When considering the various options involved in creating a startup, entrepreneurs should seriously consider the ideal size of the organization that they want to run. This will help them realize the benefits and limitations inherent in each of the following five broad categories.

In the smallest category, The Hobby, entrepreneurs do not consider the business as a full-time job and do not rely on the company as their sole source of income. These companies do not employ any full time employees and are often run out of a garage. When properly functioning these startups provide the entrepreneur with a fraction of their normal salary. Usually these businesses are based on the founder’s personal skills or interests. Examples of these types of businesses include restoring furniture, trading via e-bay or managing a duplex.

The Job category is very similar to the Hobby except that now the entrepreneur has dedicated to full-time activities of the operation and relies on the company as the main or only source of income. The founder may hire a few individuals on an hourly basis to relieve the burden of some operations but most hired labor focuses directly on production or fulfillment.

A Lifestyle business requires specialized employees who focus on sales, marketing, accounting, etc. Aunts and cousins can no longer be used as part-time staff and operations have moved into a permanent facility. While the organization is now making enough money to more than double the founder’s original salary, most of these resources are still tied up in operating expenses.

An Enterprise has become large enough to require a full-time human resources staff. The company is led by a management team with each member focused on their specialized department. Revenues are substantial and operational decisions are delegated to full-time managers. The entrepreneur no longer has to be involved on a daily basis and may take an overdue vacation.

Operations in the Corporation cover a sizeable (if not national) geography. Key decisions are now made by a Board of Directors and the founder may be outvoted. The organization may now have a well-defined legal team, human resources department, and decisions involving individual transactions rarely come to the attention of the executive team. The company may have gone public and is increasingly concerned about formal reporting.

In conclusion, it is quite common for two very similar businesses to exist in completely different categories. Regardless of which size of organization is created, the entrepreneur must be aware of what challenges and limitations that category presents and how it fits their individual skills and management style.

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