Why stay small?

Posted by: John Tozzi on August 20, 2008

Matt at 37 Signals profiles legendary Brooklyn pizzeria Di Fara. Here’s an excerpt:

[Owner Domenico] DeMarco doesn’t care about experts, franchising, or expansion because he doesn’t have to. That’s what you can do when you run your own small business. You can stay small. You can create your own thing and keep it the way you want it. You can take pride in what you’re creating and oversee everything that comes out of your oven. If people don’t like the wait, they can go somewhere else. If they don’t want to pay extra for the ingredients you grow yourself or import from Italy, that’s fine. You can be a perfectionist and take as long as you want. And the customers that care about what you care about will flock to you.

Plenty of people want to create scalable enterprises and maximize their profit, but many small business owners just want to work for themselves doing something they care about. Steve King at SmallBizLabs took a look at this last week as well. King sketched out three broad (and not exclusive) reasons for starting a business: financial return, passion, and lifestyle flexibility.

This reminded me of one surprising note from Scott Shane's book, The Illusions of Entrepreneurship, which is generally discouraging for entrepreneurs. Shane found that small business owners, despite making less on average than they would as salaried employees and facing high risk of failure, are happier than their W-2 counterparts. In fact, business owners would have to earn about 2.5 times as much on average to be as satisfied working for someone else, Shane says. (Our interview with Shane is here.)

We tend to use sales, profit, and growth to measure business success, which ignores the "soft" factors like satisfaction. By those measures, DeMarco's pizzeria is probably unremarkable.

When you're building a business, are you looking to maximize profit or maximize happiness? They're not mutually exclusive, of course, but they're also not the same.

Reader Comments

melv

August 20, 2008 11:04 PM

I agree. Satisfaction with oneself makes the world seem nicer.

- a smallbiz owner.

Namitha

August 21, 2008 5:13 PM

Completely agree that maximizing profit & maximizing happiness are not mutually exclusive but they are neither directly proportional.

Jacob

August 24, 2008 3:15 PM

As a small business owner I can say it is much less stress to keep your business smaller. When these tougher economic times roll around I do not have to think about who I need to lay off. I do not need to panic about large payments on loans. My business can ride out quite a bit of stormy weather.
http://www.rexxsales.com

Edwin Co _ Manila_Philippines

August 28, 2008 6:42 AM

I keep try to keep everything in my business simple whether big or small operations (if possible). So that it is easily managed whether in good times or bad.

www.royalantcraft.com

Jacob

September 2, 2008 10:39 AM

As much as I want growth for my company I am mostly interested in stability. To that end I am on a paced growth plan that will help me to grow at a pace I can keep up with so the growing pains will be at a minimum and the position of financial strength my company will retain will make it possible to weather hard economic times.
http://www.rexxsales.com

Melissa Giovagnoli

September 28, 2008 11:48 AM

I have had a company for 22 years and written 11 books that focus on networking and entrepreneurship. I have interviewed over 2000 entrepreneurs and continue to find that the happiness factor in their business is a top priority along with the rare element of freedom that so many who work in corporate environments don't have.

I can recall hundreds of moments over the past two decades where I have said, "Wow. I get to leave this large company I am now consulting with and actually go out and experience the rest of this perfect weather outside." If you do it right, entrepreneurship is actually more secure (when you build a healthy referral network) and more fun and exciting. http://www.networlding.com

J Allen

August 16, 2009 6:10 PM

If you are a business owner and you want to keep control of your company staying small is the way to go. If you have no control issues bigger is OK. However I have yet to meet an entrepreneur that does not have control issues.

http://www.rexxindustrialparts.com

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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