How does a small, entrepreneurial company grow into a large one? Not that growth is necessarily a virtue. Many successful and dynamic small businesses have no intention of ever getting big. They pay their debts, they make a decent living for their owners, they introduce new products and services each year, they enable families to pass the business down from one generation to the next, and they are an integral part of their communities. Nothing bad about that at all.
But let's say you have a hot new product or service and you really, really want to grow big. How do you do it?
A good case can be made that there are only three ways--three "strategies," if you will--by which a small company can grow into a large one:
1. Serving a growing niche market. A "niche market" is a market that's big enough to make your business successful, yet small enough not to attract attention from large, well-capitalized competitors. If your niche market is growing, your business will as well. Mantiques, a New York City antiques store, specializes in the tchotchkes your Dad had in his den back in the 1940s and 1950s. Think vintage smoking accessories, liquor-related items and sports figurines. There are thousands of antiques stores in New York, but only a couple that focus on this niche, because the market probably wouldn't support more businesses.
2. Legal monopolies. This path is available only to companies with products and services that qualify for patents, copyrights and other "legal monopolies." When you obtain a patent on an invention, for example, you acquire the exclusive right to make, market and sell that invention for a period of X years. If anybody else tries to sell a competing product based on your invention, you can sue them for "infringing" your patent and get them to pay you royalties on any sales they make. Companies in the computer software, high-tech, music and publishing industries mostly follow this path.
3. Get big fast. If your product or service is geared to a mass market, you have to expect that big companies will compete with you sooner or later, especially if you are successful. It is the highest, most sincere compliment that big corporations pay to entrepreneurs. Because you probably will not be able to match a big corporation's economies of scale in producing large quantities of stuff at low cost, your only hope of growing the business may be to "get big fast"--establish your brand as a new market category, and build market share so quickly that it will be more attractive for big companies to buy your business than build their own manufacturing and marketing capability from scratch. The companies that launched Snapple� all-natural soft drinks and SoBe� enhanced soft drinks are examples of companies that "got big fast" and are now part of much larger food and beverage conglomerates.
Which strategy is the right one for your business? It depends entirely on the nature of your products and services. If you are not serving one or more niche markets, and your products and services do not qualify for "legal monopolies" such as patents and copyrights, you are probably selling to a mass market and therefore must adopt a "get big fast" strategy by default. Or else, just stay small.
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Cliff Ennico is host of the PBS television series MoneyHunt and a leading expert on managing growing companies. His advice for small businesses regularly appears on the "Protecting Your Business" channel on the Small Business Television Network at www.sbtv.com. E-mail him at email@example.com.
Cliff Ennico is a syndicated columnist and author of several books on small business, including Small Business Survival Guide and The eBay Business Answer Book. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state.