Don’t take this email the wrong way. I love a small businesses with less than 10 employees.
They are nimble. They can move quickly. They can adjust. They can do things that don’t scale and they can grow.
And they are exceptional opportunities for many entrepreneurs. You can run a small shop with 10 employees where every decision comes to you and you can still get very rich but larger businesses (50+ employees) have a massive advantage in so many ways.
Now that I've built my portfolio of companies to 350+ employees and $40M of annual revenue, I've gotten to see just how powerful bigger businesses can be.
Once you get a machine rolling down a hill with 10 million or more in annual revenue, the game is is ON and the rich start getting richer.
Now, the owner can afford to make investments to grow their company without sacrificing anything when it comes to their personal quality of life and so they do and they win.
Why small businesses struggle:
- They can’t afford leads.
When you try to grow you realize that qualified leads are the lifeblood of all businesses. Without them, your business simply dies. And once you get past a few million in revenue, you realize that high quality leads start getting very expensive.
You will begin spending several hundred dollars to get someone to your website in order to fill out your form, let alone convert to being a paying customer. Small businesses without the revenue and profit margins to invest here can't compete.
2. Small shops lose all of their best people.
Because it is expensive to get leads and small businesses can’t afford to invest more before the profit comes, a lot of these operators lose their best people since they get recruited away by bigger shops who can offer large signing bonuses and higher pay.
If your competitors are doing $20M/year and you are doing $2M/yr, your employees won't stay long because there are bigger opportunities in the market for them to go chase. Employee churn is a silent killer in SMBs and it's one of the hardest parts that stops them from achieving more growth.
3. They have the wrong mindset about expenses vs investments.
Recruiting is expensive. Marketing is expensive. SEO is expensive. Software is expensive. Insurance is expensive. It's all expensive.
But successful business owners know that and are willing to pay the price. They aren't scared to spend money if there is an ROI.
They are happy investing $10K to use a recruiting firm for every new hire to recruit someone good.
They know $15k a month on SEO will pay them back $25k per month.
They know that a $100 cost per lead on Google to get more people in the door is worth it so they’re willing to spend $50-100K per month on this to drive more traffic and leads.
Small business owners can’t wrap their head around this. So they never take the risk and they get left behind.
The reality is that most business owners only look at their expenses as expenses.
Every dollar they spend means a dollar less in their pocket.
So they under-invest in growth and they try to nickel and dime everyone. Great business owners do the exact opposite.
They look at their expenses as compounding investments.
Every dollar they spend today on great people, equipment, software, or services might be a $1.20 or $1.50 in their pocket at the end of this year, and then $3 or $4 dollars more at the end of next year.
Meanwhile, they’re getting $2-10 in equity value appreciation too if done right over time.
Once you understand this, your whole world opens up and you'll take a very different approach to spending money to grow your firm.
4. They don't think about building assets.
To a business owner, you need to think about everything as an asset.
Your people are an asset. Your website is an asset. Your processes and systems are an asset. The more you invest into building these up, the more valuable your business will become.
Having trucks with advertisement wraps are assets. Having a killer Google Business Profile with 500 great reviews is an asset. Having a referral program that works is a massive asset. Data and the right CRM + reporting is an asset. It all compounds.
5. They can't delegate and don't have specialization.
Another thing that hurts small operators is they don't have enough cash to hire people who can specialize in what they do best. When you have more cash, it allows each person at your company to have 1 job.
At a small company people have to do many things and wear many hats and they are required to be more competent and better decision makers. And it is an environment of chaos.
At a large company employees can specialize in very specific niches. You can have a Hubspot lead and a PowerBI expert. You can have a paid social ads manager and a paid search manager who only focuses on Meta vs Google. You can have an outbound sales team and SDRs who sell via inbound booked calls every day. Once you get to this level, your life gets a lot better because you can really go deep and specialize on things smaller companies can't do.
Ok so what now?
How do I overcome this as a small company?
You have to copy what the big dogs do.
You spend money on a great website. You invest in your Google Business Profile. You spend money on SEO. You spend money on marketing and paid ads.
You fine tune your website so that it is VERY easy to become your customer. And you recruit and hire like a madman.
You raise your prices so you can afford great people. You utilize overseas talent like the big dogs do.
And you do a lot of the things that don’t scale while you still can.
Once you get past $10M in revenue or so, business becomes a lot easier. There are a ton of benefits to this stage and I'm appreciating more and more of them every day.
P.S.
If you’re interested in hiring an overseas employee to work remotely for your company, Somewhere is the place to go.
We've helped 4,500+ companies hire 8,000+ roles for 70% less than US equivalents.
I've hired 200+ people through Somewhere. Customer service, data entry, estimators, financial analysts, executive assistants, marketing, sales, engineering, ops, you name it.
A few folks available to interview now:
- Tamryn a senior EA with 6+ years of experience for $3,000/month
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Just click here if you want to interview them.
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A few posts from this week:
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Onward and upward,
Nick Huber
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