Why most small business owners stay small business owners and do not grow their businesses?

At some point in time, every small business owner asks themselves the question, “What is the reason that most small business owners stay small business owners and do not grow their businesses?” The answer is not always straightforward and can be influenced by a variety of factors. However, based on our experience working with small business owners, there are several key reasons why many small businesses remain small and do not grow their businesses.

Well, let’s face it – growing a small business can be tough. You’ve got bills to pay, customers to please, and employees to manage. Who has time for growth?

But in all seriousness, there are a few reasons why some small business owners choose to stay small. Maybe they’re comfortable with the size of their business and don’t want the added stress of expansion. Or perhaps they’re just not sure how to grow and are afraid of taking risks.

Lets explore some of the reasons in detail with real life examples:

Sense of Stability and Security

One common reason why small business owners may choose to stay small is a lack of ambition or desire for growth. Some entrepreneurs start a business with the sole purpose of generating income to support themselves and their family, without any intention of growing the business beyond its current size. For these business owners, staying small provides a sense of stability and security, and they may not see the benefits of pursuing growth opportunities.

Here is one such experience

Being a small business owner myself, I do not want to grow it significantly.

I run a small company in professional services industry (5 employees). I can already see 2 major disadvantages associated with growing your small business:

1. Increase in operating expenditure. At the moment, the company is easily manageable. Growing it to 20 employees would require to employ “middle management” just to manage other people, to employ the additional support (HR, IT) and to significantly increase fixed costs (rent, tools).
2. Increase in stress levels. Following the above, I would need to extend my working hours and worry about our sales pipeline.

But I am fine and this is a lifestyle choice: I prefer to work 50–60 hours a week, have most things under control and do what I like to do. I am ready to hustle, but I have already worked in strategy consulting and know my boundaries.

On the other hand – instead of growing, we are constantly working on improving our profitability:

1. We improve our margins. The standard gross margin in our industry is 50%. Thanks to a well-designed product and vendor management, we managed to achieve 70-75%.
2. We constantly improve the % of billable hours. We resigned from unnecessary meetings, we automated administrative tasks and we focus on delivering our projects.
3. We constantly lower marketing and sales costs. High quality work results in customer loyalty and word-of-mouth recommendations which in turn lower our costs and improve profit.

I was thinking about this matter in the recent months, and my current conclusion is: it is better to have a small and profitable business than to simply grow revenue, especially if you want to maintain a healthy lifestyle. Originally published on Quora by Maciej Marmuszewski.

Fear of Fairlure

Then there’s the fear of failure. Yes, you heard that right. Some entrepreneurs are actually afraid of becoming too successful because they worry about losing control of their business or not being able to keep up with demand. It’s like they’re saying, “I’d rather be a big fish in a small pond than a small fish in a big pond.”

Expanding a business can be risky, and many small business owners are hesitant to take on additional debt or other financial obligations. The fear of failure can also be driven by a lack of experience or knowledge of how to successfully grow a business. In these cases, small business owners may choose to stay small to avoid the potential risks associated with growth.

Here is one such experience

I am a small business owner. I am a one-truck trucking company. I do not want to grow larger. My net income is just fine. I have enough headaches without adding more trucks and hiring drivers and expanding.

I have learned from other’s experience. I know several people who were right where I am today and expanded. They went from one truck to ten or more. In a few years, they were back to one truck. “It’s not worth it,” They would tell me. “I learned my lesson and went back to a size that was manageable.”

Originally published on Quora by Blair Blakely.

Resource Limitations

Additionally, some small business owners may lack the necessary resources to pursue growth opportunities. For example, they may not have access to additional funding, or they may lack the human resources needed to manage a larger business. In these cases, small business owners may choose to stay small to avoid the challenges associated with expanding a business.

Real life example:

One real-life example of the challenges small businesses face in pursuing growth opportunities due to a lack of resources is the story of a small tech company called “Tech Solutions.”

Tech Solutions is a small startup that specializes in developing mobile apps for businesses. The company started with just two employees – the founder and a software developer. Over time, they began to gain traction in the market and received requests for new features and customization options from clients.

However, the company struggled to keep up with these requests due to a lack of resources. They did not have the funds to hire additional developers to meet the demand, and the founder was already overworked with sales and management responsibilities.

You may want to know – Fast Working Capital Loans for Small Businesses

As a result, Tech Solutions had to turn down potential business opportunities, and their reputation suffered as a result of delays in delivering their products. This put them at a disadvantage compared to larger competitors who could quickly meet customer demands.

Eventually, Tech Solutions realized that they needed to secure additional funding to hire more developers and expand their operations. However, they faced challenges in securing funding from traditional lenders due to a lack of collateral and limited revenue.

The company was forced to explore alternative funding sources, such as crowdfunding and angel investors, to secure the funding they needed to grow. They were eventually able to secure the funds and hire additional developers to meet customer demand, and the company began to experience significant growth.

Lack of Mentorship

Another factor that can prevent small business owners from pursuing growth is a lack of support or mentorship. Many small business owners operate independently, without the support of a business partner or mentor. Without guidance and support, small business owners may struggle to identify growth opportunities or may lack the confidence needed to pursue them.

Without the benefit of a sounding board or someone to bounce ideas off of, small business owners may struggle to identify growth opportunities. They may be so focused on the day-to-day tasks of running their business that they don’t have the time or energy to explore new ideas or opportunities for expansion.

Moreover, a lack of mentorship or guidance can make it difficult for small business owners to develop the confidence needed to pursue growth opportunities. They may feel like they don’t have the knowledge or expertise to take their business to the next level, or they may be afraid of taking on new risks or responsibilities.

Real life example:

Samantha is the owner of a small catering business that she started a few years ago. She is passionate about cooking and loves creating unique dishes for her clients. However, Samantha has struggled with growing her business beyond a certain point.

One of the main factors that have prevented Samantha from pursuing growth is a lack of support or mentorship. She operates her business independently and has no business partner or mentor to guide her. Without the guidance and support of someone more experienced, Samantha has struggled to identify growth opportunities or lacked the confidence needed to pursue them.

Final Thoughts

It’s no secret that in today’s fast-paced business world, growth is key. If you’re not growing, you’re stagnating – and stagnation can be the kiss of death for a small business. But even with this knowledge, many small business owners are hesitant to take the plunge and pursue growth opportunities.

Maybe you’re one of those small business owners, feeling stuck and unsure of where to go next. Perhaps you’ve been successful in your current state, and the thought of expanding seems daunting. Or, maybe you’re worried about the financial risks associated with pursuing growth.

But let me tell you – staying in your comfort zone and avoiding growth can be just as risky as taking the leap. In fact, it can be even riskier. If you’re not actively pursuing growth opportunities, your competitors are – and they’ll quickly leave you behind.

Imagine the possibilities if you were to take the plunge and pursue growth. You could expand your product or service offerings, increase revenue, and attract new customers. With growth comes the opportunity to take your business to new heights, to achieve levels of success you may have never thought possible.

Yes, pursuing growth can be scary and challenging. But it can also be incredibly rewarding. The key is to approach growth opportunities with a clear strategy and an open mind. Consider your options carefully, and don’t be afraid to seek out advice from mentors or other business owners who have successfully navigated growth.

So, if you’re a small business owner who’s been hesitant to pursue growth, take a deep breath and dive in. Believe in yourself and your business, and don’t be afraid to take risks. Who knows? You might just surprise yourself with what you’re capable of achieving.

Share your thoughts on – Don’t you want to grow your businesses? Share your thoughts below!

Image Credit: by tonodiaz on Freepik

Bipin Adhikari

Analytical accountant and curious blogger with over 5 years of experience as an Audit Associate and accountant. With expertise in auditing, accounting, and finance I help organizations drive top-notch financial management practices to achieve organizational success.