Would you be surprised to hear that smaller businesses are also more productive? Businesses of 2-9 employees tend to revolve around the owner and typically generate far higher revenues per employee than ones with 50-99 employees – between 100% and 400% higher on average, according to The Guardian Life report, “Small Business Trends as Companies Grow in Size.”
This analysis of small business owners’ mindset by employee size was based on the Institute’s study of “What Matters Most to America’s Small Business Owners”, published in 2009.
Both reports are excellent. In fact, they are the first effective encapsulation of the attitudes and values of small business owners and how they change as the business grows, that I have read.
The points apply equally to Canadian small business owners. So think [North] America.
What matters most to America’s small business owners
Small business owners are committed to staying in business for the long haul. First on their priority list are customers, second are employees and third is “ME”. Money is way down the list.
Respondents applied a 21-point scale (from +10 to -10). The Institute notes that positive intensity numbers above 3 are highly significant and indicate strong feelings. Their top 15:
- Customers who appreciate what we do (5.8
- Keeping the customers we have from leaving (5.6)
- My employees (5.5)
- Freedom (5.3)
- Keeping customers happy (5.2)
- Whatever matters most to our customers is what matters most to me (5)
- Being able to make my own decision (4.9)
- Finding some way to be noticeably different from competitors (4.9)
- Quality of my staff (4.7)
- Setting my business apart from our competitors (4.7)
- Figuring out ways to take advantage of any economic condition (4.7)
- Creating a positive working environment for all (4.6)
- Giving our employees reasons to feel better about being part of our team (4.3)
- Being able to have the satisfaction of creating something of value (4.3)
- Doing something for a living that I love to do (4.2)
Exploring small business owners’ mindset by employee size
The Institute has found sharp differences in what matters most to small business owners as their companies evolve from very small entities to sizeable enterprises.
Among the compelling findings in “Small Business Trends as Companies Grow in Size” are that “personal freedom” and “maintaining work-life balance” – often key reasons why someone buys a small business – decline as the business grows larger. On the other hand, “creating opportunities for others” – an unexpected pleasure of running a growing small business – increases.
In their analysis, the Institute segmented and defined four types of small businesses based on the number of employees:
- 2-9 employees –The focus is on “the principal.”
- 10-24 employees –The focus is on “the business.”
- 25-49 employees –The focus is on “the team.”
- 50-99 employees –The focus is on “the organization.”
Maintaining productivity becomes increasingly difficult for small business owners as the size of their company grows. As mentioned earlier, businesses of 2-9 employees typically generate between 100% and 400% higher revenues on average per employee than ones with 50-99 employees.
At the same time, expanding the business becomes a more dominant focus of small business owners at larger firms. Among owners of companies with 50-99 employees, 53 percent say they are planning to expand their small business. However, at the other end of the spectrum, 58 percent of small business owners of companies with fewer than ten employees say they are happy just to maintain business as usual.
Based on their research, the Institute concludes:
As a small business grows larger:
- The importance of the management team and employees rises, including the need to adopt effective practices for finding, motivating and retaining good employees.
- Professional services advisors, such as accountants, lawyers, financial advisors and insurance agents, increase in value.
- There is a growing focus on the disciplines of professional management, with an intensifying interest in improving productivity and stimulating innovation.
- The small business increasingly begins to shift its focus externally, rather than looking inward. In particular, the small business owner places greater value on membership in – and information from – professional associations, and the value and importance of the company’s Web site rises.
Your thoughts? Where is your focus? Where do you fit?