Popular perception holds that companies must always be growing or they’re dying. There’s either up or down, win or lose, success or failure. I think that’s a harmful dichotomy that leads to the death of perfectly viable companies in their quest for constant growth.
Not all companies are meant to have thousands of employees or a billion-dollar market cap. Some companies are meant to be just 10 people or 5 people or just one guy. That’s what their product, niche, or technique is capable of sustaining and there’s absolutely no shame in that. Finding your natural size should be a triumph, not a capitulation.
We haven’t found the natural size for 37signals yet, but I can tell you that it’s not a thousand people. It’s highly unlike to be a hundred. Right now it’s 10 and it’s been in that vicinity for quite some time. Our revenues have been more than doubling every year since the beginning, but that probably won’t last forever either. That’s okay too!
Chasing growth as an end in itself makes it all too easy to give up optimizing for today: “When we break 5 million dollars, we’ll start working less”, “when we’re 50 people, we’ll start giving more back to open source”. Bah. Growth begets growth and you’ll end up chasing even bigger numbers and never have the time to do what you really want.
Don’t let growth be your primary yardstick of success. You only get to celebrate breaking 5 million dollars in revenue once, taking Fridays off will make every single week a better one. Stop making excuses for why you can’t do this or that in the name of growth. Just Do It.
Chris
on 06 Jun 08It’s Friday! (Shuts down computer and goes home)
Ryan Heneise
on 06 Jun 08I recall watching an interview by Guy Kawasaki of Steve Ballmer where Ballmer said exactly the opposite. Most companies do seem to exist solely for the purpose of growth.
jamie
on 06 Jun 08I’m a big proponent of what a nice, small company with modest expectations for profitability/growth. I don’t need to get rich in an IPO, it would just be nice to have something that supports me AND keeps me happy (and again, Fridays off are an excellent example).
Problem 1: Getting the initial growth from bootstrapping-phase to being profitable enough to quit ones day job…
Mateo
on 06 Jun 08recall watching an interview by Guy Kawasaki of Steve Ballmer where Ballmer said exactly the opposite[/blockquote]
That is the conventional wisdom, and it’s certainly better for shareholders. But it isn’t necessarily what’s best for the employees, for the consumers, and the products being bought.
Aaron B
on 06 Jun 08I’m curious… when did 37s decide to take off fridays… Before or after making their first 5 million?
Chris Chowdhury
on 06 Jun 08Wow! You mean the primary objective of every enterprise isn’t world domination!
Brenton
on 06 Jun 08The focus on growth comes from the same place as the focus on VCs. If you are investor backed, you must grow. It’s part of the contract you enter with them, and they will show your ass the door if you have other plans in mind.
If you’re a happy little bootstrapped company, growth is not necessarily a focus for you. You can play by your own rules, but you’re a happy little bootstrapped company and probably knew that already.
Skot NElson
on 06 Jun 08+1
Whoops. I guess that’s growth ;D
Todd
on 06 Jun 08This much is true: A big business is NOT necessarily a good business. However, there are times when growing your organization and expanding your service is actually the responsible answer. Being able to do what you love is both valuable and rare. Don’t crucify that amazing opportunity in a misguided attempt to protect it. Growth isn’t always about more money. It can be what keeps your labor of love alive in a competitive landscape.
Andrew Conard
on 06 Jun 08David – Thanks for the post. I appreciate it on many different levels. As one of the pastors at a mega-church, I wonder how this applies to faith communities. Not all communities are destined to be huge and I think that it is even healthier for them not to grow huge.
For both businesses and churches, there are things that small is able to accomplish that big is not. Likewise there are things that large is able to accomplish that small is not. There is a need for both for a healthy economy – financial or spiritual.
Peter Urban
on 06 Jun 08I agree, it’s all about Grwoing Smart. Helping others to Grow Smart is the sole purpose of our company. Click on my name if you want to know more.
Very good post David, and although you guys keep repeating the message it can’t be said enough. In the last 15 years I’ve gone through massive ups and downs with my Plainpeak, in Germany and North America and by Growing Smart we were always able to come out on top where others just disappeared (over eager growth can easily lead to bankruptcy) , quit out of frustration or stress overload or simply got disillusioned. I am curious to see where 37’s natural size will be.
GeeIWonder
on 06 Jun 08Re: The not feeling a need to grow (an awkward paraphrase, I grant you) and ‘happy to be what we’re doing’ (not feeling a need to diversify) lines.
These sound great, and I instinctively agree with them, however if you follow them too closely, it’s a recipe for disaster. Agile, niche groups get wiped out all the time, and always have. Diversification helped the individual groups of Roman legions (that you referenced in a previous post re:team size) survive for as long as they did.
Agile is good. Niche is good. But agile diversification into several niches is even better.
Taylor
on 06 Jun 08@Brenton: If the focus is on traditional VC, which is built upon the need for large $$ exits to make money on their investments. But there are other ways to raise capital to fund bootstrapped companies that aren’t tied to an economic model based on growth.
@jamie: I’m trying to think about ways to create new capital structures to fund emerging companies based on cashflow, not exits, which changes the need to grow, and allows people to build and maintain “lifestyle” businesses based on their own desire to grow.
Essentially, not everyone has the same goal in creating a company. Let’s figure out ways to create the ecosystem to support this.
Gary
on 06 Jun 08That statement is a bit too vague for me. Growth of what? staff? revenue? profits? And I’m not sure what to make of ‘popular perception’. Is that the perception of the general public, of business people, of investors, of the employees, or some other group?
The way I would frame things would be that a business must always be generating a reasonable return on investment. What is reasonable is going to depend on who is doing the investment. Is it the founders? Is it a family business? Is it outside investors? Is it the stock holders?
Without an acceptable return on investment there is no point for the business to exist since it would be better to invest the money in something else.
Another big consideration for small companies is the exit strategy. Is the goal to have an IPO? to simply close shop when you retire? to sell the business to private investors? to sell the business to another founder or a key employee? The answers to those questions are going to guide the way the business is run and how it ‘grows’ (employees, revenue, profit, page views,...)
GeeIWonder
on 06 Jun 08@Taylor In my experience, VC isn’t so much focused on large $$ exits as just clear exits. The higher the risk, the larger the reward generally needs to be, but that’s everything. Angels of course, may not even care about exits at all.
Grant
on 06 Jun 08love it – so true
Achovy Dave
on 06 Jun 08Context is everything. I want to grow my business to where I am comfortable with what I earn, grow it to where I am not struggling to pay the bills, and I can quit the job with the jerk boss and not look back.
Growth to that point is good. I dont need to dominate the world. Though having the weather machine and death ray would be fun at parties.
Benjy
on 06 Jun 08I guess there’s something to be said for remaining private. Public companies have too much pressure from Wall St. and investors to keep growing, but there’s not enough emphasis on whether it’s good, organic growth or not.
Apple has grown by developing good products that people want, broadening their offerings within narrow categories and using their products to cross-sell the rest of their lineup. iPods became popular because they were good… company grew. People who were happy with iPods decid buy iBooks and iMacs… company grows more. My Apple stock bought in 2001 and 2003 is up over 15x.
Compare that to many companies who try to grow through merger when they can’t grow organically, and have all sorts of issues with merging cultures, branding, overcoming resentful customers, etc. Most of the time, these mergers don’t end up benefitting anybody. Employees get laid off, customers face worse service and higher costs, savings aren’t fully realized because the integration costs so much, etc. and ultimately the investors lose their shirt.
Benjy
on 06 Jun 08I guess my example’s not perfect, seeing as Apple’ ins’t private, but I guess I meant to demonstrate how having the luxury to pursue the right opportunities for organic growth are better than being forced to seek grow by any means possible in order to hit quarterly or annual estimates. Steve Jobs may be powerful enough to do that even with shareholders, etc. to answer to. But most of the time, it’s the private companies who have an easier time of doing this, I think.
D
on 06 Jun 08David: Is that “Just Do It” sans “THE SWISH!!??”
Nolan Eakins
on 06 Jun 08Since the company’s name has 37 in it, that’s where I would stop. 37 signals coming from 37 people at 37signals.
TD
on 06 Jun 08I wonder if this could also be extended to the economy in general. I’ve always found the obsession with growth kind of unsettling; there must be a limit to growth. When I watch the economy channels on TV and there’s a guy standing in front of a huge LCD at some stock exchange pessimistically stating that the (wealthy) Creplachistani economy only grew at X% last quarter, I can’t help but think their pessimism is ill-placed. What I would call stable they call stagnant, and I get this feeling that all this focus on growth is kind of.. unsustainable.
Jose
on 06 Jun 08NIKE…
Tom G
on 06 Jun 08I’ve seen people frustrated by never getting promoted because their company isn’t growing. Their corporate ladder is clogged with people not moving up or out. This is how big company’s lose good people. I think this is where the conventianal wisdom comes from.
From what little I know, 37 Signals doesn’t strike me as conventional in may ways so the conventional wisdom doesn’t apply well here.
beto
on 07 Jun 08If it were up to me, I’d most likely be working with teams no bigger than, say, 20 people. I’ve found that number as the ideal balance between a small but solid and enjoyable team, and when everything that used to be cool about working at a given place may potentially start sucking.
When I was hired at my current workplace, we were a mere 8 people on board. Now we’re nearing the seventy-something employee mark, and while the people on charge have done a rather stellar job of preserving much of the laid-back attitude that defines us, it’s practically unavoidable you lose some things in the process of scaling. Holding an impromptu discussion over a project in the kitchen is no big deal with a team of 5 people. Not so with 50. The more people you get on board, the less of a grip you can have on everything, and the more likely the implementation of rather annoying control systems. Goes without saying that, should I be taking care of a startup of my own in the future, would rather be in charge of a small team. As long as business is good and allows you to put food on the table and then some, you should be good to go and be happy.
Elliott
on 07 Jun 08You dont ‘find’ the natural size of a company. It will be evident based on the naturally arrising economies of scale in your industry. Technology has made it possible to gain a large number of economies: advertising, access to consumers & international reach for free / cheaply.
Stanium
on 07 Jun 08Well said! Setting and chasing goals is good as long as you don’t forget about the living the moment.
vinnie mirchandani
on 07 Jun 08Aren’t you happy you don’t have to answer to folks like Carl Icahn and other investors who could not spell WEB if you spotted them a W and a E…. :)
It is refreshing to see a company like yours focus on customers and your developer ecosystem. Way too much of tech is investor focused…
steve
on 07 Jun 08We do a lot of research on small business and for the majority of mainstreet small businesses (fewer than 50 employees) growth is not a key business driver. These firms are often very happy with their size and growth for growth’s sake is not important to them.
Public companies are different story. They either grow or die – or at least they either grow or the management team is fired.
Anonymous Coward
on 07 Jun 08I highly recommend you check out “Small Giants: Companies That Choose to Be Great Instead of Big” by Bo Burlingham. Its not always about becoming the a thuge, publicly traded, multi-national corporation.
Like Seth Godin famously put it “Small is the next big”
J Lane
on 07 Jun 08I’m happy that we’ve seen growth in the number of posts David’s been making lately. We all really appreciate your insight.
Michael Neale
on 07 Jun 08Don’t forget the environmental impact of growth for growths sake.
Home
on 08 Jun 08Well put. I’ve recently struck out on my own, and for the foreseeable future, I don’t plan on growing at all. I make a comfortable living on my own, but work many hours for it. Should I grow, it would be to look out for friends and colleagues while bringing back ownership of my “free time”.
Praveen M
on 08 Jun 08David, It seems to me that Product companies have a choice of (keeping) a small team and decide what cool features they are going to add to their product, based on customer feedback. Consulting and Systems Integrators however, have this different revenue model where they bill each developer by the hour and more the number of developers (group size), more the revenue and ROI. I wonder if these sort of companies can ever be small yet profitable?
Kevin Milden
on 08 Jun 08It is a sad truth. I constantly have people throw the number of people they have in their company in my face as a benchmark of success. It is funny becuase these companies have 5x the resources in both people and capital yet have very little to show for it. I agree with David. It is not how many people you have it is the impact those people have and what they are able to acomplish. It shouldn’t matter if that is a team of 40 or a team of 4. 37Sgnals has done a great job of showing that it doesn’t take a lot of people or a huge amount of money to be successful. We should all thank them for being a shiny becon of light in an oversized and overfunded world.
spin_girl
on 09 Jun 08Thank you, Thank you. As a one-person web strategy shop (with lots of trusted and synergistic partnerships) balance is precisely what I am striving for. Yet, if I gave you a penny for the number of times, people I’ve just been introduced to ask me how big my company is, you would be very rich. When they find out that I am small and niche (but very good at what I do), they look at me like I am a hobbyist – which I am most certainly not. As a refugee from Corporate America – I just want to do meaningful work and make a tidy profit doing so. I might grow the company, if necessary, but then again, I don’t feel compelled to. Thanks for re-affirming that Small is the new Big!
Dave 0.
on 09 Jun 08I totally agree with everything that was said in David’s blog post. I’m just wondering how a company of 10 people handle customer service for over 1 million? You guys must have incredibly intuitive software and perhaps a Hal 9000 on standby ?
JF
on 09 Jun 08I’m just wondering how a company of 10 people handle customer service for over 1 million? You guys must have incredibly intuitive software and perhaps a Hal 9000 on standby?
When you build simple products your support requirements are relatively simple as well. We receive between 100 and 150 emails a day that require our attention. When you make things easy on your customers you make things easy on yourselves too.
Dave O.
on 09 Jun 08@JF That’s not bad at all, impressive. I can certainly see the value in building simple products that works.
Jan Hinrichs
on 09 Jun 08Thank you very much for your article. It’s great to read that not everythig in the tech and internet world today needs to be scalebale or needs to have a market cap of 100m and more.
dt
on 09 Jun 08“Growth for the sake of growth is the ideology of the cancer cell.”
- Edward Abbey
This discussion is closed.