A reflection for entrepreneurs

When I was in grade school, I sold chocolates to my classmates. I sold it higher than the price at the cafeteria but they still bought. I was selling convenience. And I enjoyed every moment of it. It was the selling, it was the joy of convincing someone to buy at a more premium price. Ever since, I would and could sell stationery, clothes and many things I also liked to use or eat. The profit, I could eat or enjoy in goods or cash. That was my simple formula: get into something you like or enjoy and it does not really feel like a business.

The problem of scale

I guess this is how businesses journey. You start with a dream and start small. A client comes and then gets impressed with your business model, your cooking or your product. They offer to scale you to 10 stores or to distribute your product to hundreds of stores.

You get excited, scared but happy and you journey on to meet your new partner, usually a customer with financial muscle. You check your passion, it is still there, and you carry on.

And then the reality sets in. Your new partners check the numbers, they have to be more efficient, they have to put in systems and then you start to lose control. Then reality bites. The control for your product or your “baby” is starting to slip away day by day from your fingers, and you also start going on a slippery slope, wondering why you even said yes.

Yes, that is the problem of scale. Did you owe money that you were tempted to partner with someone totally removed from your line of business? Did you just get excited because someone was willing to bankroll you?

I heard three tales from different friends and but all with the same ending. A partner comes, you get excited, you expand or change locations, you give up control of your quality (ingredients have to be changed a little, etc.) for the business efficiencies.

Then the horror begins. There now is a bureaucracy to face, even if all you need is a light bulb to be replaced. The ingredients are changed for better costing. You cringe but that is business efficiency as defined by financial partners.

We have been tempted many times before – a loan at very low interest to expand, a business partner to expand locations nationwide, but we prayed for control, not to owe anyone who would change our ethos. We can stay small but independent. We can stay small and preserve our values. We have stayed small and agile. No bank, no financier, no partner who will drive us to expand where we do not want to go.

How many brands have we seen change because they have been acquired by venture capital? Unless this was the original plan of the founder, there is no problem. But that is the temptation of expansion – seeing your brand everywhere. It feels good until you realize it has lost its soul. Or has started to lose soul.

Brands are nice when they stay controlled, focused on the original plan, recipes and spirit behind the business. Sometimes, the better model is for people to put money in but with no hand in operations. Or best is to grow organically, doing your best without any financial burden to think about.

On the other hand, there are operators actively looking to be discovered by a financial partner. This kind of entrepreneur probably has no heirs who can take over and is itching to expand beyond their hometown. They know they have a big idea for expansion and they are just waiting to be proposed to.

As a consumer, I like small brands that keep their personality. Once I hear of a takeover or a buy-in, I change my choices and I go to the next small brand where you can still talk to the owner and know they have kept their business values.

Even in farming, I am not looking at scale. I am the nightmare of an economist who sees beauty in scaling up. Because scale for me always messes up things. You may now have to use chemical fertilizers to speed up growth, pesticides to control harvests, etc.

From five ingredients in a product, you now have 12, including preservatives and ingredients we cannot even pronounce.

From one store, you now have 20 but the soul is gone. Such is the usual course of business. You start a dream business, but you get tempted to scale. Then you start running after numbers like you never did. And when the numbers get big enough, you get tempted to go public. Once you become public, you are no longer what you used to be, where you used to be.

So, again, ask yourself why you started the business in the first place. Was it not about a mission? Did you not start wanting to give jobs to people? Did you not start wanting to change an industry? And now, why are you chasing numbers, why are you chasing even your soul?

I thought I would write this to remind entrepreneurs to reflect on why they started a business in the first place. Because when entrepreneurs have a higher purpose, everyone wins. We talk about shared prosperity and that can be achieved if we never drift from our original purpose, our original higher mission.

In these hard times, maybe it is also time to stop running for a bit but to pause and reflect – why are we in business? I share this with my co-entrepreneurs because as we get the high from the joys of expansion, we sometimes no longer pause to check if we are still on course.

What is your business mission? And please believe it is never a sin to scale down, if that is what will make the business more sustainable. Not everything is about scale.

Go back to the mission and you will feel relief. And you will win.