We recently spoke with a member of our co-working space who owns a PR/marketing company and is the only employee of his company. His firm is successful and has been in business for more than three years since he left a large organisation where he was the head of PR.
Our conversation got around to the issue of extra help. When he needs additional skills to fulfill assignments, this man told us, he contracts with other professionals. That was interesting, we thought. Because, although our PR friend is talented and able to support his growing family, his comment about contracting out work raised a question for us.
“Was he trying to build a company or create a job for himself?” we wanted to know. It was a question that struck a chord with this man – one that he later came back to discuss.
In that context, we want to state that we think that we consider either choice a valid one, but one that should be a specific choice, nonethless. We work with and mentor dozens of small start-ups. And many start as single-person firms completing short assignments for a variety of other small or midsized companies.
There are more than 28 million small business in the United States. Of these, single-person companies are in the majority, representing three-quarters of all small businesses. These individuals, whether they planned it or not, have created a job for themselves. They will not hire employees or scale their businesses. Of course, this need not be negative.
Done right, a one-person business can actually make good money. It can give the owner the flexibility to choose assignments that are interesting and fulfilling, and to enjoy the flexibility of working when and where he or she chooses.
The “micro-business” category
A person working alone, or essentially alone, is a business category we call a “microbusiness.” The defining characteristic of a micro business is that the owner or principal is doing the primary work of the business, whether that means providing PR services or baking cookies. He or she may have helpers in the form of other freelancers, vendors or assistants, but the preponderance of the revenue comes directly from the work of this principal.
The key to the success of a micro business is how well the principal does its primary work, which includes selling. We find that the biggest challenge in a micro business is finding a steady stream of work. By the way, our consulting practice is a successful micro business. We have one paid full-time employee, our marketing assistant, but we do the primary work of our business – consulting.
The small business structure
Many people who own micro-businesses choose to stay at this size. However, if you want to build a business, you will need to grow, at least to what we call a small business structure, where the primary work is delegated to others. The owner might keep his or her hand in it, but others do the preponderance of the work. At this point, how well the principal does the primary work of the business is not nearly as important as it was when the enterprise was a micro business.
Personally, we found it difficult to transition to a small business structure in our consulting business for a couple of reasons. First, when people hire Doug and Polly to consult to their small business, they want Doug and Polly, not an associate. Second, we are limited in the amount we can charge to the very small businesses we serve. The fees we charge are not high enough to pay talent at the level we would want and still provide a sufficient markup for our firm. Therefore, Whitestone Partners has stayed a micro business.
It’s important to note that the role of the entrepreneur changes dramatically as a business moves from micro to small. In fact, at the point of transition, the principal has to let go of doing the very thing that made the company successful at the prior step. In a micro business, the business lives or dies based on how well the owner performs the primary work of the business. This makes sense. You have created a job, and you keep it or lose it based on how well you do the work.
But, if you choose to grow to a small business structure, success depends on how well the principal hires and manages workers. If you are the principal, your role will change. If you want to bake cakes, stay a micro business. If you want to run a bakery, you need to build a business. This is a scary step and one that can cause the principal sleepless nights.
Many people we mentor balk at this transition when they realise they will be responsible for the livelihood of others. However, to grow a business, yourself,, eventually, you will need to hire and manage employees.
Next . . . the midsize business
If you’re successful at the small business stage and choose to continue to grow, you will become a midsize business. The business has transitioned from small to midsize when at least one layer of management has been inserted between the principal and those doing the primary work. The principal has gone from managing workers to managing managers. This might sound like a small change. It is not.
To effectively utilise managers, the principal must delegate decision-making authority to them. This means giving up a measure of control, which is often difficult for entrepreneurs who are used to making every significant decision in the company.
This also is the transition with which growing companies most often struggle. Letting go of some control is a scary thing for entrepreneurs, and they are right to feel trepidation. Ineffective delegation can lead to the ruin of the business – we’ve seen it too often. To enable effective delegation, the principal will need to ensure that the appropriate infrastructure is in place. This means making certain that the business has the right managers, that processes are well-documented and that appropriate metrics are in place.
Meanwhile, if you want to create a life that has flexibility and autonomy and allows you to work when and where you like, you should probably choose to stay a micro business. As we like to say, you can create a great job for yourself. If you want to build something more, you will need to move to a small business structure. You will know that you have transitioned from micro to small when you have delegated most of the primary work of the business to others.
To truly scale a business, you will need to transition to midsize or larger. You will have done this once you’ve delegated day-to-day decision-making authority to a layer of managers that is between you and those doing the primary work of the businesses.
Each choice is valid and comes with its own challenges. However, we believe that it should be a conscious and specific choice. If you are unsure which direction to take, find an experienced consultant or mentor with whom to explore your options, skill sets, and desires. Then move forward with purpose in the direction that works for you.
This article was originally posted here on Entrepreneur.com.
Build Solid Back-Room Basics For Business Success
What do South African entrepreneurs really know about what goes on behind the scenes building of businesses?
South Africa has a vibrant start-up culture with great ideas starting out with a bang, but closing down with a whimper because entrepreneurs picture the glory at the destination, but not the nitty gritty of the journey to get there.
Be smart about scale
When I started out, I literally did everything myself. I negotiated and signed leases, I arranged the furnishing for our apartments and managed the interior décor process. When guests started using our apartments, I signed them in at reception, and then carried their bags.
At that stage, there was no money in my business to pay for attorneys, interior designers and decorators and there certainly wasn’t enough money for porters.
However, when we got to 70 apartments, it didn’t make sense for me to be a porter any longer, so I hired someone to do that job, explaining clearly what I expected of him. Before I did that, though, I spent time designing incentives for him so that he would be more affordable for me, and so that he could earn as much money as possible.
Related: Training Is A Two-Way Trick
Know your talents – and your limitations
There are certain things I’m really good at, but I know without a doubt that sales isn’t one of them – and without sales, you don’t have a business. I couldn’t afford a top-flight salesperson, but I knew that I could attract the right talent with the right business model. I set some high targets for Pamela Niemand, but offered her one third of the business if she met them. We both won: she earned a share in a successful, trend-setting business, and my trend-setting business became successful!
Use your skills – but know when to hand over
My background in corporate finance meant that I had all the accounting skills I needed when we first started out, but I knew that the time would come when I would need someone focused on that side of the business full time. Doing it all myself first meant that I could brief my first full-time accountant clearly and with a deep understanding of what would be required – and that I could help that person find and fix any challenges based on my experience.
In summary, my simple advice to anyone starting out would be to bootstrap your business yourself without investors or staff for as long as you can, but don’t over-extend yourself. Know when to delegate tasks away so that you can focus on what you’re really good at – but don’t do it before you have a solid understanding of what’s required. Know what you’ll never be able to do, and bring in that resource from the beginning – but do it based on performance-based incentives, so that your fledgling business doesn’t lose out if your early hires don’t perform.
The Myth About The Relationship Between Entrepreneurs And Taking Risks
This is the true relationship between entrepreneurs and the apparent illusion of risk.
“I can’t be an entrepreneur or start a business. I don’t have the appetite for risk.” This line is spoken regularly to brave few that leave the perceived safety of a job, take the plunge and venture into the unknown world of being an entrepreneur. However, there is a gross misunderstanding in the appetite for risk that entrepreneurs are believed to have innately inside of them.
The little-known truth is that the majority of entrepreneurs don’t like taking risks and according to Luca Rigotti and Mathew Ryan in their paper that explores a model for quantifying risk and its translation into enterprising action, the results were very interesting.
Risk is explained by these theorists as taking action where the outcomes are unpredictable as well the factors leading to that outcome are unknown. One of the theorists in this area, Saraswati, who coined the term “tolerance for ambiguity” has a more accurate description of what the outside world deems taking a risk.
In simple terms, entrepreneurs don’t go head-first into the shark infested water because they like the idea of danger and potentially being eaten alive; or the thrill of being able to say that they survived whilst others perished in a pool of maimed flesh. They carefully calculate that the sharks have been fed recently, some of the sharks are ragged tooth sharks that whilst looking like they are set to devour a human being, are actually incapable of opening their jaws wide enough to bite. For those sharks that still have space or who smell blood and can’t resist the urge to kill, the entrepreneur has a cage set up that he can retreat into quickly and a knife with which to protect himself.
Tolerance for ambiguity is the careful evaluation of what is known at the moment where a decision must be made and an open-mindedness for what is not known. This, coupled with the agility to change course when new information is presented, has earned the label of high risk appetite. The appetite is not for the risk, but it is the ability to move down a path, when all the information is not known.
I likened it to a person moving around in the dark holding a candle. The candle casts a light that illuminates a limited parameter around the person holding the candle. What is beyond the light that the candle casts, is unknown and potentially a risk. But as the person moves forward, the light reveals what was unknown and in the shadows. As the light reveals new information and new challenges added to what they have already learnt, the person can make better informed decisions. The tolerance is in not knowing what lies in the shadows yet to be illuminated by the candle and then the confidence in his or her own ability to act on what new information is discovered.
None of this behaviour is risky or irresponsible. There is careful consideration for what is known and a tolerance for what is unknown. And once there is more information available, a calculated next step is taken and more information is assimilated into what is now known. This is the true relationship between entrepreneurs and the apparent illusion of risk.
7 Skills Every Entrepreneur Needs To Adopt Today
Want to know what skills can help you build confidence and your business? Here are seven…
For some people, becoming an entrepreneur is as easy as stepping off a bus. They have a big idea, they bring it to life, they hire employees and the next thing they are in a building smothered in branding and living the business dream. For others, the idea and the passion are there but they are unsure as to how they can make these into a sustainable reality. Entrepreneurial spirit isn’t like instant coffee – you don’t add ideas and suddenly get all the skills you need to thrive.
Want to know what skills can help you build confidence and your business? Here are seven…
1. Believable vision
Make sure that your vision is believable and achievable. It has to live in the realms of possibility, not as a blue-sky idea that looks good on paper but wouldn’t work in reality. You need to be able to live this vision so make it realistic and achievable. This will not only keep you on track, but your employees as well.
2. Be inclusive
You need to ensure that every person who works with you feels as if they are part of your vision and understand it. They need to relate to where the business is going and how it plans to get there. Many leaders don’t understand why employees are not engaged with their business and it’s because many of them don’t actually understand what the business does.
3. Communication is critical
If you don’t have fantastic communication skills, then now is the time to hone them. When it comes to building employee morale, commitment and engagement, nothing works as effectively as constant communication. The same applies to client relationships. You need to repeat the vision and ethos of the company at every opportunity and you need to be part of the team that does this communication.
4. Be visible and transparent
You are communicating, now you need to make that communication genuine by being both open and clear. People respond incredibly well to transparency. They feel as if they are part of something that recognises their value and contribution and it fosters a more inclusive company culture. Often toxic cultures come about thanks to a lack of communication and visibility. People know when things are being kept secret and react negatively to it, regardless of whether they’re an employee, a customer or a manager.
5. Be practical
You aren’t going to build an empire in a fortnight so focus on a realistic and practical business strategy that has clear benchmarks and even clearer goals. Communicate these with the company and keep everybody on the same page. Practical and achievable means long-term success.
6. Build opportunities
As people become immersed in your company and part of its growth they will also need opportunities to grow. You need to tie their careers to the business and create opportunities for them.
7. Be human
It takes people to build a culture, a company and a future. It’s essential that you are human in your interactions and your treatment of others. The impact that a down to earth and authentic attitude can have on a company is extraordinary.
Women Entrepreneur Successes2 days ago
Watch List: 50 Top SA Business Women To Watch
Snapshots2 days ago
25 Of The Most Successful Business Ideas In South Africa
Support for Women Entrepreneurs1 week ago
11 Quotes On Hard Work, Risk-Taking And Getting Started From Beauty Billionaire Estee Lauder
Entrepreneur Today2 weeks ago
Introducing The Conext Sponsorship Forum: A Platform To Explore, Learn And Connect With Great Next-Gen Sponsorships
Company Posts2 weeks ago
Why Spartan Is Focusing On SME Funding And How They Can Support Your Business
Entrepreneur Profiles6 days ago
The House That Moladi Built – How Challenging Traditional Building Empowers Local Entrepreneurs
Self Development2 weeks ago
Research: The Power Of Meditation That Will Blow Your Mind
Leading14 hours ago
How To, In Practice, Distinguish Between Executive, Non-Executive And Independent Directors And Their Functions