EcommerceBytes-Update, Number 269 - August 22, 2010 - ISSN 1528-6703     2 of 7

For Many Online Sellers, Smaller Is Better - Part One

By Greg Holden

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In the early days, every businessperson thinks about growth. You want to grow your business to something more than an idea in your head, or a small concern with only a handful of customers. But is there a point at which a business actually stops making money? Is it better to stay small, not only to keep your operation manageable, but to maintain profitability?

In fact, eBay observers already know that some businesses actually become less profitable when they grow bigger. This can include part-time sellers who work on their own and try to move to full-time selling.

"Part-time sellers are probably going to be more concerned about keeping things at a certain size," observes eBay seller Robert Spencer, an online seller who markets books on eBay, Amazon.com, Alibris, and other outlets through his small company Mind Electric Books. "Smaller, full time ones probably only worry about getting past a point of diminishing returns. I know that for myself getting larger would cause problems, but my attitude is that I'll deal with that if it happens. "

If you're just starting out or struggling to make your business profitable, the "problem" of keeping your operation to a manageable size might seem like a far-off dream. But listen to the reasons why businesspeople scale down. You'll learn that the basic business approaches to keeping a business lean, mean, and profitable can be applied to a business that's just starting out as well:

1) Focus on building long-term relationships. Ongoing relationships between customers and clients are the bread-and-butter of any business. But what about relationships between coworkers? Working with people you trust is essential too. And it's hard to develop them if you are continually hiring or looking for help - or if you're overworked.

The Usman Group, a Web design firm, prides itself on creative thinking and quick turnaround. Like any service provider, the firm wants to attract good clients, and usually, bigger clients mean bigger income. But when Usman landed a big-name client, they had to rethink their mission. "Deadlines and project demands were beginning to outweigh our individual human capabilities as time in the day quickly ticked away," explains Krista Jancik, Senior Media Strategist with Usman.

"We have ultimately decided to remain "small" and hire with the mindset of building long-term friendships within our team environment. We're a modest family of creators here, and while we understand there are mouths to feed and bills to pay - we believe that recruiting an internal network of employees you can trust, with talent that exceeds your expectations, makes the quality of work that much better."

2) Plan for growth. There are all kinds of growth. You can experience meteoric growth, glacial growth, steady growth, and the like. But an entrepreneur named Woody Hunt advocates "organic growth." He defines this as both planned and self-sustaining. Hunt says he is succeeding in an exceedingly difficult industry: bookselling. He has an online bookstore located in Martinez, California, Woodys Books, and a software tool for book sellers called Book Volume. He's also developing a software tool called SkillCount.com. He does all this with a staff of less than 25.

Hunt's advice is to grow in a measured, steady way, following a plan - doing one thing a week, doing one thing to expand or market your business better. "Growth is necessary to stay successful and profitable," he says. "Where people get into trouble is in an unhealthy rate of growth, which brings a much higher risk factor. The benefit of organic (planned and self-sustaining) growth, in addition to the lower risk factor, is you can really take the time to tweak your business based on what your customers want and need."

3) Don't be afraid to downsize. Craig Wolfe gave up the big time to go into business on his own, and he says: "Yes, you can be small and very, very successful."

Wolfe was once president of a company that was the largest publisher of animation artwork from television commercials for companies such as Coca-Cola and Anheuser-Bush. He sold off that operation to start a very different company - one that sells celebrity rubber ducks.

CelebriDucks markets a line of celebrity rubber ducks that look like Barack Obama, the Wizard of Oz characters, and other notable figures. Don't laugh - the ducks were voted one of the top 100 gifts by Entertainment Weekly.

"I run the whole business out of my house and outsource everything," says Wolfe. "I pretty much turned down all investors to have the life and business that I can enjoy and intelligently manage without giving up my soul. Bottom line, I wanted to create a business based on my passions. I loved iconic advertising art and realized no-one was really exploiting the commercial value of this kind of artwork so I started a company based on my love of it."

Wolfe is proud that his business is known as "the finest rubber ducks on the market." No matter what you sell, doing what you love and are passionate about is one of the best pieces of advice for businesses of any size. It's also a way to stay small despite pressures to grow or sell out.

In my next column, I'll describe some businesses that have made an effort to stay small, and explain the reasons why.

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About the author:

Greg Holden is EcommerceBytes Contributing Editor. He is a journalist and the author of many books, including "Starting an Online Business For Dummies," "Go Google: 20 Ways to Reach More Customers and Build Revenue with Google Business Tools," and several books about eBay, including "How to Do Everything with Your eBay Business," second edition, and "Secrets of the eBay Millionaires," both published by Osborne-McGraw Hill. Find out more on Greg's website, which includes his blog, a list of his books, and his fiction and biographical writing.


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