NFIB

When Small Business Gets Big
09/ 27/ 2005
by Lena Basha

To any new business owner, getting past the start-up phase is a dream come true. Landing new clients, making more money, outgrowing your old office–who wouldn’t want that?

But with growth comes a new host of challenges: Before you know it, you’re facing the same strangleholds that often overtake big companies.

You thought staying in touch with your customers was hard when you only had 20 of them, what about when the roster grows to 600? Keeping 10 employees motivated is enough of a challenge, how about when your payroll is pushing 100?

The small-business owners in this story have the answers to these questions and more. By beating the five traps that routinely derail growth in large companies, these small-business owners learned how to get big without the baggage.

Trap 1. Losing touch with customers.
When Joe Fulmer bought the family business from his father in 1986, he had big plans to grow a small sewing machine retail store into a super-sized sewer’s haven. Today, Fulmer’s Dayton, Ohio-based Stitching Post has 115 employees and brings in $11.5 million in revenue annually. Growing the family business wasn’t easy, though. Fulmer succeeded by avoiding a rut so many big retail businesses fall into--losing touch with the customers. “As a small business, you can’t compete on price,” Fulmer says. “But you can give your customers what the ‘marts’ can’t—service.”

At the Stitching Post, customers are the No. 1 priority. Fulmer strives to make sure the 600 customers who visit the store each day are greeted warmly as soon as they walk through the door. “We like to make our customers feel like they belong here,” he says. “It’s warm and inviting when you first walk in. We have free beverages for everyone, and we also have a lounge for kids or husbands of our shoppers. While their wives are shopping, they can relax, read a magazine or watch TV.”

One perk of buying a sewing machine from the Stitching Post is its trade-in program: During the first year of ownership, Stitching Post customers can return their machines for a refund or upgrade to a more advanced machine. Buyers can also take unlimited on-site classes to learn how to use their machines. “The idea is to get the customer inspired so they keep coming back,” he says. “The worst-case scenario is selling someone a sewing machine and never seeing that person again.”

Fulmer also relies on his customers to let him know what’s working and what’s not. “We survey our customers to death,” he says. “We’re constantly getting feedback. About 99 percent of the surveys we receive are fabulous. But when they’re not, I want to get it fixed immediately.”

2. Employing a staff that doesn't care.
Keeping employees on top of their game is something that Dion DeLoof works on daily. The owner of Atlanta-based staffing firm Anteo Group admits it was much easier when he had just a handful of employees. But with three other offices in Dallas, Los Angeles and London and almost 100 employees, DeLoof has had to change his strategy.

“I used to believe that you could motivate an unmotivated person,” says DeLoof, who relies heavily on internal referrals when hiring. Now he would rather see a good attitude and the ability to juggle multiple tasks than experience on a resume. “The constant struggle is to not let your employees get stagnant,” he says. “You have to find the people who aren’t comfortable being that way.”

DeLoof has a no-nonsense policy for dealing with unmotivated employees: Either get motivated or get your things and go. “We feel we have an obligation to either help someone, or let go of a person who hasn’t lived up to the motivation of others. Letting a mediocre person stay on staff will drive your motivated people crazy.”

DeLoof keeps spirits high around his offices with Joke Wednesdays, Breakfast Fridays, weekend boat trips, and most importantly, by trusting and empowering his employees.

“We check our egos at the door,” DeLoof says. “Even though my business card says ‘President,’ we don’t live and die by titles. I’ll be the first person to take out the trash on my way out. We’ve also tried to develop an environment where people are comfortable making mistakes. Then, you get a self-motivated workforce.”

3. Forgetting your focus.
Like every hopeful entrepreneur, Umesh Verma was determined to succeed when he opened his small business almost 20 years ago. A former consultant for Shell Oil, Verma started up Houston-based Blue Lance, developing IT security and regulatory compliance software for businesses. But by the time Verma’s staff had grown to 70 in the mid-’90s, the business’ reach had expanded far beyond just software development.

“Hardware, training, repair service--we ran the whole gamut,” Verma says. “We thought if we didn’t give our customers exactly what they wanted, we would lose them. What we should have said was, ‘We don’t do that, but here’s someone who does.’ That way you are still servicing your customers.”

When his business started tanking, Verma realized that being a jack-of-all-trades wasn’t working. “We had lost control,” he says. “We didn’t know where we were making money or where we were losing money.”

Verma knew that to keep Blue Lance afloat he would have to cut back on the number of services offered. “It took a few years to refocus and reenergize,” he says. “We slimmed down our operations by identifying our strengths and what we enjoyed doing.

“We made the hard decisions, rolled up our sleeves and went to work. We knew we were in trouble, but we never focused on whether we would close the business. We just focused on what we did well.”

After downsizing to 35 employees almost 10 years ago, today Blue Lance has 65 employees and manages growth by staying focused. “We’re only in the business of developing our software product and marketing it. For everything else, we use partners.”

4. Abandoning your creativity.
Talk to any of the 232 employees at New Belgium Brewing Company, and they’ll tell you what sets their brewery apart from all the others: constant creativity.

“We’ve always found creativity and innovation intellectually more intriguing than doing just whatever,” says Kim Jordan, owner of the Ft. Collins, Colo.-based brewery that she opened with her husband in 1991.

Since growing from a home-based venture to the fifth-largest craft brewery in the country, New Belgium’s stakes have gotten higher: There’s more money involved, and there are more eyes watching their every move. But that hasn’t stifled creativity at New Belgium--it just makes it harder.

“You have to balance the tried-and-true with a heavy dose of leaping off the ledge, as many times as not. And that’s a challenge, because people naturally resist.”

Jordan has kept employee pushback to a minimum by making sure creativity and innovation are deeply imbedded in New Belgium’s culture. “We involve our whole company in strategy development each year, which helps keep involvement and innovation alive.”

Employee involvement came in handy recently as New Belgium built a new packaging hall. Jordan asked employees who would be working in the new building to brainstorm ways that a natural ventilation system (which goes along with the company’s philosophy of environmental stewardship) could keep employees cool. The solution they developed was an underground water storage system that would help cool the building during the day.

“I often think a rash decision is not the creative one because it’s the first thing you access, which tends to come from what you perceive to be the truth about the world,” Jordan says. “You have to question your truth, because sometimes it is more like a bad answer.”

5. Allowing internal turf battles.
Somewhere between having two employees and one client to 220 employees and more than 1,000 clients, internal communication at San Leandro, Calif.-based TriNet started to break down.

“When you’re growing fast and every department is focused on meeting their individual needs, there is a tendency to become compartmentalized,” says Martin Babinec, president of TriNet, a human resources services company.

“When everyone is working in their silos and not communicating between the silos, you run into problems,” he says.

A leader who has always tried to pay attention to every aspect of his business, Babinec identified the turf battles being waged early on--before they affected TriNet’s bottom line.

“I wanted to make sure department heads weren’t putting their own interests before those of the company,” Babinec says. “That happens when your people don’t have a clear enough picture of the business’ best interests, and when they don’t have a stake in the outcome.”

To combat turf battles, Babinec makes sure all of his employees understand the company-wide goals and gives employees--from the top to the bottom--a stake in the outcome. TriNet uses a combination of short-term and long-term incentives for its employees—cash-based compensation for near-term results and equity in the company as a long-term incentive.

“They can see the value of their stock marching up, which gets people thinking about the long-term repercussions of the decisions they make.”

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