Making It
May 01, 1993
If I weren’t so optimistic, I could easily get discouraged. As an owner in a small, growing company, it seems that every time you make a buck, someone is there to take it away from you. In the short term, growth doesn’t always make you more money— in fact, there’s a cost associated with it. And no one in government seems to care that it is the small companies that are providing the real job growth in this country. Here are some examples from our own situation:
In Massachusetts, our unemployment taxes just increased by 2%, with no warning. It’s just another tax that happens behind the scenes. We haven’t laid off anyone— why should we have to pay extra?
As a company with multi-state operations, both our personal and business taxes have become increasingly complex. We have to fill out countless personal, corporate, and state income and sales tax returns. This means that we are now paying thousands of extra dollars in accounting fees, not to mention taxes.
Health insurance premiums keep going up. Our group policy is up for renewal this summer. We just received a notice, with no explanation, that our monthly premium would rise by more than 80%.
Every time we hire someone, we have to go out and buy more office furniture. Then the person in the cubicle next door thinks he or she needs a new lamp or desk chair because the “new guy” got one.
Then there are computers— not only do we need a new one every time we hire someone, but that purchase seems to have three or four other expenditures tied to it, such as consultants to reconfigure the network, new software, or upgrading of the file server.
Each time we add a couple new people, we have to add another phone line. Eventually, the phone system has to be replaced because it reaches its capacity. And the long-distance carrier is there waiting to slap on extra charges to have accounting codes on each new line.
Office supplies are an area that most of us think very little about. The more people you hire, the more paper, pens, and pencils you go through. And people get lazy. Instead of going to the discount office supply store where they can get three-ring binders for $2.50 each, they go to the office supply store across the street where they cost $10 a piece.
More people means that you have to spend more time dealing with internal issues— things that don’t do anything to improve your client service or put more money in your pocket.
It’s no wonder that many design and environmental consulting firm principals eventually come to the conclusion that growth just isn’t worth it. But before you get too negative, let’s look at a few of the benefits of growth:
More people means more marketers. The old days where the principals do all the selling are long gone. Everyone in a professional service firm can and should sell. The more fingers you have in the marketplace, the less likely you are to have major swings in your workload.
More people means more capabilities. With a bigger staff, you can do more work, larger projects, and hopefully, turn out better quality. As you grow, you can start to add specialized experts versus the generalists you have to have when you are small. And, you can afford better support people and administrative systems.
Volume equals value. The fact is that if all other factors remain the same, the value of a firm increases with bigger volume. Even if profits don’t increase, more volume equates to more profit potential. External buyers always figure that they can run a business better than its present owners do.
Volume reduces risk. Although many will argue that the opposite is true, I believe that with more people, more capabilities, and more volume, a business is less vulnerable than when it is small and only one or a few key people do all the selling, all of the management, and all of the technical work.
Growth creates new opportunities to reward/promote staff. Soldiers get promoted faster in a war than during peacetime.
Although it’s easy to get discouraged by the ever-increasing costs of doing business, especially as you grow, it sure beats the alternative. Thank God for private ownership and the ability to trade off short-term profits for longer-term gain, a luxury publicly held firms can ill-afford these days. Those principals who have a winning attitude will not let the obstacles of growth wear them down. They’ll keep pushing ahead. And you know what? In the long run, the results will be there for all to see. That’s what keeps me going.
Originally published 5/01/1993
About Zweig Group
Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.