Do All Small Businesses Aspire to Grow?

Although conventional wisdom may suggest the answer is yes, the short answer is, not always.

There are many factors that determine the size of a business. Such factors include access to finance for key investments, costs of doing business, health of the overall economy, and industry-related trends. Although these can be important constraints for growth, entrepreneurial motivations also matter. Some entrepreneurs just do not want to make it to the big leagues.

In fact, survey data has shown that scaling up their business model is not the top priority for small business owners in the United States. Instead, they value a business that is a size they can manage by themselves or with the aid of a few employees. This is particularly true for necessity-driven entrepreneurs, for whom starting a business often responds to scarce high-quality employment opportunities. 

If you do a search on Google regarding small businesses, dozens of articles on “How to grow your business” will come up. But as a firm grows, new challenges and tradeoffs arise. Sure, there are good reasons to scale up your business, such as reaching new markets and increasing profit. However, not all business models are scalable. Robert Sutton, professor at Stanford University and author of the book “Scaling Up Excellence: Getting to More Without Settling for Less,” argues that only exceptionally good business ideas are worth scaling.

Entrepreneurs with no desire to grow their business can take advantage of their relative size. Think about your local coffee shop and the type customers it attracts.  Its comparative advantage may be precisely that it is not a chain with a massive number of similar feeling establishments.

Competition from small businesses is coming to other industries that have conventionally been dominated by large players. For example, the increase in small law firms and co-ops, made possible largely by technology, demonstrates that efficiency gains can be substantial in less bureaucratic business models.

Growth is not indispensable for a small business’ survival and success. There will always be entrepreneurs who start a business with ambitious expansion plans and will indeed become game changers in their industries. We have seen it happen with high-tech firms that started in an old garage. But the business arena has room for everyone, including those who are championing small business that stays small.