In my 30-plus years of owning a small business, I always wanted to grow because I thought that things would be better if my business was larger. 

I always wanted to grow because I consistently thought that things would be better if my business was larger.  What I found after many years of trial and error, is that each business and owner have a “right-size” for them. This could be determined by how much capital they have available to grow their business; the location of their business in a market; or the limitation of the owner(s) along with their management skills.  

What I found after many years of trial and error, is that each business and owner have a “right-size” for them. This could be determined by how much capital they have available to grow; the location of their business in a market; or the limitation of the owner(s) along with their management skills.  

Let’s start this discussion by clarifying the monetary definition of being a small business, a medium-size business and a large business: small < $600,000 annually, medium < $4,000,000 annually, and large > $4,000,000 annually.

Most of us start small. Decades ago, I remember starting out with that feeling of excitement at the prospect of selling $2,000 a month. Generally, those who maintain their businesses over many years grow to new levels of excitement with broader goals.

Assuming you are a small business, ask yourself:  Are you comfortable?  Do you want to grow? How will you accomplish growth? We have all heard the expression, “Make a plan, then work the plan.”  The reason we hear this statement so often is because it is a true and effective assertion!  

Planning allows us to think about what we want and how to get there. Some of the benefits of being small, in my opinion, are:  
1.    Ability to develop and maintain close customer relationships. 

• Rewarding because you can see their reaction in person when you are installing their system
• Instills confidence and creates a better opportunity for referrals
• Allows you to learn firsthand what customers are looking for as their “next purchase or project”

2. Enables you to quickly see your inventory, the waste of materials and/or time, and allows you to bring those issues back in line in a timely manner. 

3. Easy cash management review.  Nothing is hidden, either you can buy that new tool, or you can’t because you know how much is in the checkbook. And if you pay your bills on time, you will understand your month-to-month profitability combined with cash flow. 

4. Freedom to make autonomous decisions. You are in control of your business affairs. 

5. Flexibility and speed, which can take many forms.

• Ability to determine your own time off
• Ability to change an Installation. Schedule to accommodate another job is made easier because you have a close customer relationship.  
• Freedom to quickly solve a problem without having to spend time gauging opinions from others. 

6. Exclusive ownership. You own both the profit and the debt. Additionally, if you wanted to move to another community you could pick up and take it all with you.

7. If you choose, you can become the “local celebrity” by being involved in the Chamber of Commerce, Kiwanis or Rotary Club, your local Builders Association, or your local church…which helps to cement your ability to stay in business during slower times.

A good rule of thumb for a small business is to pick from the two types of income for yourself:
1. Job compensation. Examples would be a salary for being the designer/salesperson or installer; commission for your sales; or piecework for your installation team.  

2. Owner compensation. Fair compensation percentage for taking the risk and worry of owning a small business – 10 percent seems a fair and reasonable percentage. So, if you are a $600,000 company, then you would get $60,000 as owner. Or take it one step further – if you paid yourself a 10 percent commission on your sales then you have another $60,000. And last if you paid yourself a 10 percent piecework rate for installation, you have another $60,000.

The above sounds good but is it realistic? Can you do all of that? If not, now you know how much you would have to pay someone else to do those things for you. This will bring us to my article in the next issue, which will cover how to grow your small business.

This article is Part 1 of a four-part series.

Coming soon in Closets & Organized Storage magazine:
November/December - Part 2-Planning to Grow to a Medium-Sized Business 
January/February - Part 3-Surviving Growth
March/April - Part 4-What’s Next for Your Business?

Tim Coleman is division manager of SCE Unlimited Chicago, a division of Installed Building Products (IBP).