Let Real Needs Determine Size: Bigger Is Not Always Better

#RestraintAboutScale The authors believe 37signals stays efficient because it has achieved this restraint, generating relatively substantial profit while remaining small. They take pride in that small size. A small company can still accomplish great things. Business owners are often asked, ‘How big is your company?’ Usually, the bigger the answer, the greater the praise. But why should expansion be the goal? Is bigger necessarily better? The authors think not. Increasing enrollment and opening campuses worldwide would not make Harvard or Oxford greater. Similarly, greater size does not necessarily make a company stronger. A company’s ideal size might be five people, or one person with a computer. Entrepreneurs should find the right positioning rather than establish a target headcount at the outset. Job seekers should also recognize that small companies can be great. 37signals itself illustrates this. At the book’s publication, it had only a dozen or so employees but more than three million customers. The authors considered that sufficient, with no need for further expansion. Craigslist, the well-known classifieds website, likewise has only dozens of employees but makes tens of millions of U.S. dollars in annual profit. It has substantially changed American advertising, taking many customers from newspaper-industry competitors. Many companies therefore do not need to pursue size. Some genuinely require more people and greater scale, such as the retail industry Robin has recently discussed. That is fine: large or small is good if it matches the company’s real needs. The authors simply remind owners not to pursue ‘big’ for its own sake. They also suggest considering scale early. Many entrepreneurs face funding needs and may require outside investment to obtain sufficient seed capital. A factory or restaurant certainly needs money for premises and equipment. But many service businesses today—consulting, software, or design—have low capital requirements. If that is your business, the authors recommend avoiding other people’s money. Their position is simple: spending others’ money looks easy but comes at a price. In short, avoid external financing if you can. That sounds easy, but how will you pay for office rent, equipment, and salaries without it? Their answer: the company may need less than you think. Perhaps three employees can handle work you thought required ten. Perhaps working from home replaces a large office. Perhaps you can manage bookkeeping yourself with software rather than hire an accountant. When 37signals launched its first product, it had no office of its own; employees shared space with others. It did no advertising, spreading the word by sharing experience online. None of this prevented development. The authors even see constraints as beneficial: limited resources stimulate creativity within existing conditions. Scale concerns not just company size but the range of activities. Doing one thing well is more meaningful than doing many foolish things at once. Running the core business well is enough; there is no need for numerous sidelines. Chef Gordon Ramsay notes in his book Kitchen Nightmares that failing restaurants invariably have too many dishes. His first step on entering a restaurant is to cut the menu and perfect what remains. The same applies to business. One activity done well matters more than many tasks performed poorly. Core principles should also endure. Japanese carmakers, for example, pursue reliability, value for money, and practicality. People will still want those qualities in thirty years. 37signals stands for simplicity and ease of use. Ten years from now, nobody will say, ‘You know, I think software should be harder to use.’ The authors do not oppose expansion. They oppose pursuing it blindly: work within your circumstances. A small company that serves customers well and earns money can be great in its own right. Again, simplicity and efficiency are the guiding principles. Smallness is not necessarily a stepping stone every business must pass through. Sometimes it is the final and best form. Do not fall into the assumption that bigger is better.