Does entrepreneurship matter when it comes to the small-business sector, and can it be learned?
Rob Davidson, founder and director of growth at Davidson, tells of how he grew his recruitment and HR consulting business from a Brisbane office with a staff of one to add offices in Sydney, Melbourne and Auckland.
They say that size doesn’t matter, yet many small-business owners are wracked with self-doubt about the size of their business compared to others in their sector.
A leader’s job is to build a team, and a team’s job is to build the business.
To provide some comfort, consider these figures from a leading commentator on entrepreneurship, Verne Harnish: There are roughly 23 million firms in the US, of which only 4% gain more than $1 million in revenue. Of those firms, less than one in 10 ever make $10 million, while only 17,000 companies surpass $50 million.
The same percentages would probably hold true for the Australian economy. It is extremely difficult and rare to grow a business of any size. Many small-business owners would rightly say that theirs is a lifestyle business, and they have no desire to grow it to any size.
Having been through the painful experience personally of growing a small business, I fully understand, and sometimes envy, that decision – so long as it is a conscious choice. Many small-business owners run lifestyle businesses by default, yet secretly wonder if they have what it takes to grow their business to its full potential. To these people, I offer hope.
Can be learned
My own entrepreneurial journey began 25 years ago when I leased a serviced office in Brisbane to establish a recruitment business. Through hard work and good fortune, it has grown to become one of the largest privately owned HR consulting and recruitment businesses in Australia and New Zealand.
Day one saw me sitting on my own in a tiny office I had rented for $5000 a year. Since then I have learned some lessons.
The truth is, that like many small-business owners, I had very poor entrepreneurial skills at first. But many years and many mistakes later, I am far better now. While I may never be a Richard Branson, I am in a different space today than I was a quarter-century ago in my one-man office.
Entrepreneurship can be learned. In my case, I think I might have learned it the hard way. I wish when I had been starting out that someone had told me, ‘Just because you have started a business, that does not give you the skills to run one’.
Or in a worse scenario, ‘Just because you stole someone else’s business idea, it doesn’t mean you have what it takes to make it work.’
As Inc magazine has commented, most owners on the Inc 5000 – the list of the fastest-growing businesses in the US – privately admitted that the ideas they used in their businesses were more, or less, stolen from their previous employers. I’m guilty, Your Honour.
It looks so easy when you see someone else running a successful business, but in my case I simply did not know what I did not know.
Be curious
What a difference a good mentor would have made at the outset. Over the years I have had many great mentors and coaches. While the good ones are worth their weight in gold, the bad ones can destroy your confidence and your business. I have a good one now. In fact, he is so good we made him the chairman of our board and took him in as a shareholder. What makes him so good? Easy – he has been there and done that.
Do not use a mentor who has never had to write a cheque with their own money.
A lesson I have learnt is that the best mentors for small-business owners are people who themselves have started and grown a small business. Do not use a mentor who has never had to write a cheque with their own money.
It also pays to develop a thirst for knowledge and an insatiable curiosity. All the knowledge you can gain in a business course is freely available on the internet or in books, if you are prepared to invest the time. There is no doubt that leaders are readers, and the lack of high-quality leadership is one of the main reasons small businesses are unable to move into the next bracket.
I have found Harnish’s material particularly useful and accessible. He is one of the leading experts on growing small businesses, and most of his material can be downloaded free at Gazelles.com.
Build a team
A leader’s job is to build a team, and a team’s job is to build the business. While I’m a slow learner, I did have one profound insight in January 1998, which transformed our business.
I was sitting on a beach during the Christmas break, reflecting on the talented people we had found for our clients and the large impact they had made to those businesses. It was then I had my revelation –what if I spent as much time finding talented people to grow my own business?
People are the main differentiator in all businesses. What percentage of your time do you spend finding great talent for your business? By great talent, I mean people who are substantially better than the owners in some aspect.
Now it seems obvious, I know, but it took only seven years for me to come to that realisation, but what a difference it made.
Ultimate choice
In keeping with the ‘people’ theme, a final piece of the growth puzzle was unlocked when I read an article in the Harvard Business Review titled ‘The Founder’s Dilemma’. It says that if business founders are successful enough, they ultimately face a choice: to be king and commander, and stay in control; or to be rich. You have to choose, as few people can achieve both.
A study of 212 start-ups found that few founders have the managerial ability to lead their business once it starts to grow. ‘The founder’s attachment, overconfidence and naiveté may be necessary to get new ventures up and running, but these emotions later create problems,’ Noam Wasserman writes in the article.
This was certainly true in my case. As a first step, I handed management over to my brother while I concentrated on looking for further growth opportunities. He is better suited to running a larger business than am I, and if I am successful enough in my growth role there will come a time when we need a different level of leader again.
People are the main differentiator in all businesses. What percentage of your time do you spend finding great talent for your business? By great talent, I mean people who are substantially better than the owners in some aspect.
This is never an easy choice for a founder – they don’t call it the ‘founder’s syndrome’ for nothing.
Summing up, entrepreneurship does matter. It is not possible to grow a business without genuine entrepreneurial skills, but the good news is that these skills can be learned. Every small-business owner can substantially improve their entrepreneurial skills if they seek out the right advisors, continue to educate themselves and become obsessive about securing top talent for their business.
Rob Davidson, founder and director of growth at Davidson
This article first appeared in issue 12 of the Inside Small Business quarterly magazine
