Thinking Small

Business Schools are traditional proving grounds for Corporations (and the firms that cater to them). The models and theories that are taught tend to focus on larger companies. More to the point- the business cases reviewed in class concentrate on larger companies and often (but not always) involving larger solutions that have less relevance to a smaller company. (Caveat: Most business schools offer some form of entrepreneurship classes and some even offer specialization in managing SME's)

I’m not wondering if someone who’s interested in smaller business can get enough relevant knowledge from the formal business training to make the investment worth it. The answer is in my opinion - most certainly. I want to opine from a new manager perspective about why working for a smaller company is a better choice- at least for some people.

While getting an MBA, HBA or a B-Comm can certainly make you a qualified candidate for Ernst and Young or Delloitt, it also makes you a prized candidate for Goldfarb and Dillard Management Accountants, with a team of all of 7 CAs.

Skill exposure
Business Schools intend to train people to be well rounded managers. It is once they start working that their skills become deeper in one function, and the skills they don’t use day to day tend to atrophy. A small company allows them to get exposure to the full spectrum of business functions.

People who work at larger companies complain that they get pigeon holed into a function, and the scope of their role is relatively limited. They are expected to be highly specialized and deep, but narrow in their knowledge. In small companies- employees- especially managers are expected to wear many hats. Because there isn’t the man power to have one person designated to (as an example) product strategy, you’re expected to do product strategy, plus design, plus account management and marketing and so on.

More Say
Larger companies are traditionally tiered and highly hierarchical. Smaller companies- while still hierarchical have fewer tiers and are thus, flatter. More to the point- each employee has a greater direct influence on the company, and their own role. If they have a great idea- they can walk into the President’s Office and pitch it, and chances are- the president will be receptive.
Try that in Verizon- I’m not certain you’ll get the same response.

Greater Exposure to the Cycle
In a larger company, it’s common to compartmentalize the offering cycle, much like the functions get compartmentalized. In smaller companies- it’s not uncommon to have someone who is the specialist and is deeply involved in every aspect of the cycle.

This not only is more gratifying in that allows people to feel more like valued contributors to the business’ health rather than just cogs that participate in an iterated process.

For the company the benefit is twofold: it lays the groundwork for ownership over the project, which is taps into the highest motivator available: Personal Pride. It also allows perspective that would otherwise be lost- and that is how each step on the cycle affects each other, for example: how design and planning stage of the cycle affects the post implementation support.

Agility
Smaller companies have ability to change direction more quickly than larger. That allows them to traverse economic downs with more ease, and add or drop offerings in its brand with greater speed.
Part of it is processes; some smaller companies have tighter processes that have smaller time frames, others have no processes at all, which allows them to practice more organically (although I do not suggest this).

Another part is clients; larger companies will likely have more clients or larger clients. Changing direction on them overnight is going to be far easier if you only content with 2 major accounts and 8 smaller ones than 200 major accounts and 800,000 small ones.

Employee number; Getting buy-in from 10 employees is going to be easier and faster than buy in from 20,000.

Salary/Compensation
I’ve sometimes heard from people that small companies tend to pay less than large ones. I’ve found no evidence to support this. One of my favorite sources for salary research is payscale.com- which shows where the range of salaries lies for different positions and levels of experience, so that allows you to see what consists of ‘competitive salary’. When investigating the salaries offered by larger companies, they often post a salary range, and it’s not always necessarily in the top echelons of the average.

Having said that- I’ve interviewed for positions at smaller companies where the salary was far below average, but that was more to do with that company and its approach to compensation rather than its size. More on compensation in a future blog post!

Another thing about salary is that it doesn’t give the whole story from a compensation package. I know smaller companies with lunch days where they buy the company lunch at the launch of a project, take your dog to work, flexible hours, negotiable vacation days, and other things that go beyond the bottom line to make it a better place to work that don’t register on the T-4 slip at the end of the year and you’d never find in a cubicle farm.

In Conclusion
Smaller companies have a vibe that are all their own. If you’re down with the smaller company culture- chances are you’re not going to happy in a larger company, but if your experience is limited to larger companies- you might not be comfortable with the expectations put on you in a smaller company.

One thing’s for sure in smaller ones companies though they can give you challenges and opportunities that a larger company never can.


Thanks to John Murray who is eagerly awaiting a blog post on pizza.

Are you a Keeper?

Customer Retention
When dealing with membership based offerings- subscription based services in the form of a gym or a mobile phone, or products in the form of term limited licensed software certain level of attrition is normal.

What the normal attrition (membership drop off) rate is- depends on the industry. What’s average for mobile phone service will not be average for a magazine subscription. This normal attrition is nothing to sweat. Consumer needs and tastes change and while your portfolio may contain a robust long view, how current day products and services match to current demand will fluctuate.

If due diligence reveals that your attrition rate is higher than average you need to improve your account management efforts. It’s always easier and more cost effective to retain a current client and make them happy than to win a new customer. Keeping the churn low is a way to minimize costs to your business unit. There is no standard ratio, but it’s generally accepted that retention (keeping a client or renewing their commitment) is far less expensive than acquisition (finding a new one).

So- how do you maximize your retention?

Honeymoon’s over!
Picking up the phone about 3-6 months after an install and just making sure they’re happy with you is easy and potentially lifesaving. Instead of waiting until the contract is coming up for renewal, touch base when the honeymoon period has worn off, and make sure you’re meeting their needs and are using your product. Remember to keep it in the client's interest- not your own. Your interest will come later (when they extend or renew). Right now- it's just about them.

Constant relationship care and feeding is essential to understanding and keeping ahead of those changes needs and demands.

By being proactive about meeting their solution needs, and how you handle it can instill a trust. A trust in the company, and a trust in the offering- that would be close to undillutable.

Upgrades
In the case of custom software, making small upgrades to the install will keep you top of mind with them. If it’s gratis, they will likely be thankful (if the upgrade or change has an impact on the function or benefits to them). Best approach to ask if they want the gratis upgrade; describe how it will affect them.

Upgrades on a gratis basis are intended to improve existing functionality or to overcome shortcomings. Upgrades which provide new functionality are a sales opportunity. Focus on continuous improvement as an enhancement to your product or service. Focus on value add in order to enhance sales.

Up sell
It’s easier to start with a barebones core solution, then approach the value add latter. Spreading out the development, or adding on the extras in a piecemeal fashion mitigates the risk in the customer’s mind that that they are making a mistake.

It’s easy to be more casual about the process behind up sells. Take the same approach as you would with a new sale. Do your needs analysis, prepare an Invoice or CO (Change Order)) and commit the changes to the next version of the master spec sheet.

Gracious Loser
Some companies have hoops they require their customers to go through to cancel services. The thought is make it harder to leave- people will stay! I remember a gym that required 2 months notice to cancel service, and you had to survive a pretty aggressive grilling by a Customer Service Representative.

You’re not doing your customer service any favors by making it harder for your clients to leave. The client will be annoyed, and in the chance they find themselves shopping in your market space again- your company will not meet the short list.

In Conclusion, proper account management goes beyond sending out a yearly Corporate Christmas card. If you can master taking care of your clients, you will not only reduce costs, but you’ll find that your referrals and up sells will increase as well, which is easy revenue.

Thanks to John Murray who told me he's listening to Muddy Waters.