Small Ponds Aren’t for Everyone

For executives eyeing retirement or a mid-career change, the prospect of running a small company seems idyllic. What could be more exciting than building a business from humble beginnings into a powerhouse, calling all the shots and making all the rules? Over 20 years, I have counseled dozens of executives on making such career changes. Almost invariably, they assume that their big-pond expertise will guarantee success in more diminutive pools. But often, they fail because of what they don’t know: the particular demands of small-business life and, in some cases, their own temperaments. Would-be entrepreneurs should ask themselves two questions. First, do I have what this takes? And second, does this give me what I want? Here are some of the rocky realities on which corporate refugees repeatedly run aground. They must be all things to all people. Corporate executives have a seemingly endless supply of support. It is their prerogative to do what they do best and delegate the rest. When they lack expertise, they can find it down the hall or in the London branch or get it from an outside consultant. Entrepreneurs have no such bench strength. Consequently, they can never afford to be specialists. It is not enough to be brilliant at product development or sales and marketing if you are barely literate in cash flow. The downside of making all the decisions is that you have to make all the decisions—long into the enterprise. And that requires familiarity with all aspects of your company’s industry and operations. They are constantly being distracted by small problems. Entrepreneurs must be proficient at tasks that don’t play to their strengths, and they must do things they once may have considered beneath them. I have seen many new company owners get frustrated that they can’t spend more time on high-level strategy because they have to do things like choose network equipment and decide whether to lease employee parking spaces in a local lot. Most small companies run so lean that the CEO must be prepared to step in for anyone at any moment, even if that means operating a piece of machinery. They lose influence and prestige. Performing menial tasks can chip away at one’s ego, and so can a decline in public recognition. Former executives shouldn’t be surprised when their decisions no longer ripple the markets or the press—but still, many miss the high profile. News stations and big-business monthlies stop asking for interviews. Important buyers won’t return calls. And because capitalization is always an issue, entrepreneurs must spend considerable time rattling their cups and defending themselves and their decisions to investors and potential investors. Perpetual mendicancy does little to promote self-esteem. They are unnervingly vulnerable. Small companies are far more affected than large ones by the loss of a single customer, say, or a sudden spike in oil prices. Minor crises can shake the foundations, and entrepreneurs find their worlds constantly buffeted by external forces. They have little control over their time. Executives often view small-company life as a kinder, gentler alternative to 60-hour corporate workweeks. Once in control, these dreamers believe, they can design balanced lives for themselves and their employees. But the buck really does stop with you. Uninterrupted vacations and weekends may not have been a part of your past, but they aren’t going to be a part of your present, either. Entrepreneurs can travel to the mountains of Nepal, and still the message will reach them: “We’re about to lose the Taylor account. What do we do now?” So what traits do executives who make it in small business have in common? Versatility, obviously, and resilience. But I have observed that the happiest executives turned entrepreneurs are those who can calibrate their definitions of success—not by lowering their sights but by narrowing their horizons. That means deriving satisfaction from a first product run, acceptance by a distributor, or a single customer well served. Executives who consider these victories trivial when compared with the sometimes world-changing influence of their large-company positions should weigh other options for their next act.

Small Ponds Aren’t for Everyone

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