Entrepreneurial vs. Small Business Thinking

By Mark Zweig

Entrepreneurial firms adapt better to a changing environment, are better places to work, and build significant value over time that can be harvested.

If you have worked with as many AEC firm owners as I have (and Zweig Group has) over the past 40-plus years, the stark differences in how entrepreneurial firm owners think versus small business owners think would be very apparent.

Entrepreneurial firms grow. They adapt better to a changing environment. They are better places to work. And they build significant value over time that can be harvested.

Let me illustrate some of the specific differences below:

•  Thinking about growth. Entrepreneurial thinking says growth is required. Yes, profitability is important, but growth is where the value of the business and excitement is, and cannot be sacrificed or rationalized away. Small business thinking says profit is most important because it has an immediate effect on how much money the owners can extract from the business in the short-term.
•  Thinking about business planning. Entrepreneurial thinking says planning is crucial. Everyone should be a part of it and it should be something that actually guides daily decision-making. Progress toward goals is serious stuff. It’s not just an academic exercise that is done some years when there is time, and sits on a shelf when done like small business thinking requires.
•  Thinking about innovation. Entrepreneurial thinking says having “new” is a requirement and they are constantly trying to add new skills, services, and offerings. It requires constant experimentation and they insist that that actually happens. Small business thinking says “stick to your knitting” and don’t worry about pushing yourselves to evolve.
•  Thinking about people. Entrepreneurial thinking says you have to invest in your people. Low turnover and relationships are crucial to the company’s long-term success. People are valued and not treated as if they can be easily replaced because they cannot. Because people are so important, entrepreneurial thinking says some employees could actually make more money than some principals. Small business thinking says people need to be good order-takers. They should do whatever they are told and their purpose is to free up the time of the principals. They should always earn less than the owners. And if they don’t like something, “too bad.“ They can find a new job.
•  Thinking about marketing. Entrepreneurial thinking says marketing is crucial to the company’s success. It is an investment in the firm and not an expense to be minimized. It has to be funded good times and bad, and good marketing can make a huge difference in the firm’s long-term performance. Small business thinking says marketing should only be funded if the company “can afford it.” The real (but probably unspoken belief) is that marketing doesn’t really do much but you are supposed to have it (so they do). But it is a cost to be minimized in any case and less important than design and production.
•  Thinking about mergers and acquisitions. Entrepreneurial thinking says mergers and acquisitions should always be on the table as a possibility, even if they aren’t flush with cash to make a deal. They have a strategic plan and know how they want to grow, but are also creative and responsive to opportunities that present themselves (opportunistic). Small business thinking says there’s no point to consider M&A – it’s only for the “big firms.” Plus, “Who has time for that?”
•  Thinking about performance metrics. Entrepreneurial thinking says that firm performance metrics are like gauges on a machine. There are many to be monitored and they can help management predict what is going to happen before it actually does. They also believe the more eyes there are on those gauges the more likely things won’t go out of control. Small business thinking says the only metrics that are important are utilization and cash basis P&L, and the owners are the only ones who need to see those “gauges.” Everyone else should keep their heads down and work.

Am I making my point here? There really are some fundamental differences in entrepreneurial thinking and small business thinking. And that “thinking” makes a huge difference in what ultimately happens with your business.

Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

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