I had an interesting discussion with the owner of a successful local academy. I asked him a question, which he confessed many people including his staff and customers have been asking him over the years – why he was not expanding his school business.
He told me that over the years he has resisted requests and temptations to build more classrooms, open branches and campuses in other areas in order to expand his business.
After pointing out the benefits of remaining small and eating his cake quietly, he told me his preference is to remain small and reach out to those he can and let others have their share too.
It is generally assumed that when a business is started, the desire of the founder is to grow it into a large corporation with regional and even international presence.
However, this is not true. There are several business owners who make a conscious decision not to expand their businesses beyond a certain limit even when potential is there.
Some of the reasons most entrepreneurs decide not to expand include, first to maintain a chosen lifestyle and level of control.
Most people start a business as a form of employment; that is to primarily offer a better, secure and convenient employment opportunity to themselves.
They therefore prefer working at a comfortable pace and maintaining a good lifestyle with their family. Expansion comes with demands and responsibility that threaten their ultimate desire.
Second, they try to avoid risks associated with expansion. Expansion is inherently risky. It involves probably buying more machines, taking loans, and hiring more people. It means delegating and trusting other people to run your business and make decisions on your behalf. This means accepting to shoulder the consequences of all the decisions they make, sometimes without consulting you. If the business owner insists on being on top of things, it means working longer hours and dealing with complex management issues.
Third, they decide to stay small to avoid heavy responsibility and legal requirements that must be made by large corporations.
Large companies face more scrutiny and legal requirements from the government than small companies. Some people prefer to hide in being village players than playing in the national league.
Fourth, they lack management structures and systems for growth and expansion.
Growth and expansion is only good and beneficial to the owner of a business if sound business systems and structures are in place and working. In absence of such, the rate of failure is very high. Cases of businesses, both small and large, that have collapsed due to unplanned or bungled expansion are abundant in our society.
It is a fact that most small businesses are a one-man show. Even though they can be classified as family businesses, it is usually only one person who solely makes all the decisions.
In absence of a clear management structure, they find it rather risky to involve other people who will needlessly make decisions affecting the business in one way or another.
This article was first published on The Business Daily on September 18, 2018.