Planning Concerns of Small Businesses

One planning concern for today’s small business is the need to be Web savvy. For many small companies today, their Web operations are just as critical as traditional warehouse management or customer service operations. For example, Peter Monticup has been operating retail stores selling magic tricks, videos and memorabilia for more than 30 years. In 1995, Monticup’s web suggested they explore the Web as a way to promote their latest store. That exploration turned into full fledged online store, Magic Tricks. com. Online sales grew so fast that Monticup eventually closed his retail outlets and moved the entire operation online. Even for companies that use the Web less extensively the growing importance of e-business means entrepreneurs have to plan and allocate resources for Internet operations from the beginning and grow those plans as the company grows. Of the small companies that have Web sites, more than half say the site has broken or paid for itself in greater efficiency, improved customer relationships or increased business.


In the first two stages of growth the organization’s structure is typically very informal with all employees reporting to the owner. At about stage 3 success, functional managers are often hired to take over the duties performed by the owner. A functional organization structure will begin to evolve with managers in charge of finance, manufacturing and marketing. Another organizational approach is to use outsourcing having some functional activities handled by outside contractors. For example Method, described earlier contracted with an industrial designer for the unique dish soap bottle an uses contract manufacturers in every region of the country to rapidly make products and get them to stores. During the later stages of entrepreneurial growth managers must learn to delegate and decentralize authority. If the business has multiple product lines, the owner may consider creating teams or divisions responsible for each line. The organization must hire competent managers and have sufficient management talent to handle fast growth and eliminate problems caused by increasing size.

As an organizations grows, it might also be characterized by greater use of rules, procedures and written job descriptions. For example, Tara Cronbaugh started a small coffeehouse in a college town, but its success quickly led to the opening of three additional houses. With the rapid growth Cronbaugh found that she needed a way to ensure consistency across operations. She put together an operations manual with detailed rules, procedures, job descriptions so managers and employees of each coffeehouse would be following the same pattern.

The driving force in the early stages of development is the leader’s vision. This vision combined with the leader’s personality shapes corporate culture. The leader can signal cultural values of service efficiency, quality or ethics. Often entrepreneurs do not have good people skills but do have excellent task skills in either manufacturing or marketing. By the success stage of growth, the owner must either learn to motivate employees or bring in managers who can. Rapid takeoff is not likely to happen without employee cooperation. Stepping from the self absorption of the early days of a company to the more active communication necessary for growth can be tricky for entrepreneurs. The president of Foreign Candy Company of Hull, saw his company grow rapidly when he concentrated more on employee needs and less on financial results. He made an effort to communicate with employees, conducted surveys to learn how they were feeling about the company and found ways to involve them in decision making. His shift in leadership style allowed the company to enter the takeoff stage with right corporate culture and employees attitudes to sustain rapid growth.

Leadership is also important because many small firms have a hard time hiring qualified employees. Labor shortage often hurt small firms that grow rapidly. A healthy corporate culture can help attract and retain good people.