Small business.

June 1, 2006

One of the most frequently-asked questions at our seminars and speeches is: “What special rules do you have for small businesses?”

The answer is: There aren’t any.

It’s not a trivial question, however. There are 23 million small businesses in America. And, if truth be told, almost all of them are going to remain small businesses.

It’s a psychological issue. If you think of your business as a small business . . . if you look for ideas and concepts that will help a small business . . . you’ll always remain a small and relatively unprofitable business.

There’s a better direction. Think of your small business as a young, or startup, business. A business that might be small now, but one that could eventually become a big business.

Every big business started as a small business. After his freshman year, Bill Gates dropped out of Harvard to go to Albuquerque to write programming for the world’s first personal computer, the MITS Altair 8800.

At one point, IBM offered Bill Gates $2 million for the basic operating system he had written for the IBM PC. Now if he had thought of himself as a “small business” operator, I’m sure that Gates would have been happy to take the two mil. (

How many of the country’s 23 million small businesses could be bought out for $2 million a piece? Probably the vast majority.)

In his sophomore year, Michael Dell left the University of Texas to launch his personal computer company, a business he had founded in his dorm room.And what company was Dell’s major competitor at the time? Would you believe, it was IBM.

Dell Computer started in the year 1984. That year IBM had net profits of $6.6 billion, the largest any company anywhere in the world had ever achieved. That year, according to Fortune magazine, IBM was the most admired company in America.

Today, Dell is the world’s largest maker of personal computers. And IBM is out of the personal computer business after billion-dollar losses.

Forget David vs. Goliath. How about a second-year student at the University of Texas vs. the world’s most powerful company?

In 1984, IBM had 50 percent of the business personal-computer market. Furthermore, all of IBM’s major competitors were labeled “clones” because they sold the same Windows/Intel systems.

If Michael Dell had read a book entitled “Special Rules for a Small Business,” he might have been inclined to chuck the PC business and get into fast food. “Gee, Michael, maybe a Baskin-Robbins franchise here in Austin might be a better bet than taking on IBM.”

I’ve observed many successful entrepreneurs over many years and they have two qualities that set them apart from normal human beings. One, they are absolutely fearless. Two, they think narrow.

Bill Gates was less than thrilled when he got to New Mexico to check out the MITS operation. “Every good idea was half-executed at MITS,” he said.

“Did you think it was going to under?” he was asked.

“All the time, all the time.”

Under the circumstances, any normal person would have gone into the personal computer business himself. But Gates kept his focus on software even though he had serious doubts about the ability of his only customer to stay in business.

Michael Dell also thought narrow. Normally a company wants to maximize sales by selling its products in all distribution channels. Not Michael Dell. He focused on selling personal computers by phone.

And not all types of personal computers either. He focused on the business market.

Thinking narrow paid off big for Dell. One product: the personal computer. One market: the business market. One distribution channel: direct by phone. Dell Computer in the decade of the nineties had the best market performance of the Standard & Poor’s 500-stock index.

John Schnatter never went to college. Instead he started a fast-food operation in his father’s tavern in Jefferson, Indiana. The original menu: cheesesteak sandwiches, submarine sandwiches, fried mushrooms, fried zucchini, salads, onion rings and pizza.

Would John Schnatter (also know as Papa John) have become famous if he kept adding things to his menu? I think not. Instead, he decided to focus on pizza.

Papa John’s Pizza has become the third largest pizza chain in America (after Pizza Hut and Domino’s) with sales last year of $969 million.
It’s always the same. In every business, in every industry, in every city in the world, you’ll find small businesses hungry to grow, but their strategies are always the same. They follow the Who, What, Why, When, Where and How of small business thinking.

• Who else can we sell to?

• What else can we add to the menu?

• Why can’t we get into other lines of business?

• When can we expand our range of products and services?

• Where else can we distribute our stuff?

• How can we increase our share of our customers’ purchases?

In the Atlanta yellow pages under “movers,” there are 230 listings. Virtually everybody does everything. Commercial & industrial. Local & long distance. Small & large moves. Packing & unpacking.

Brian Scudamore was 19 years old when he saw a truck full of junk in the drive-thru lane at a McDonald’s. That was the inspiration for 1-800 Got Junk?, a company that now has more than 150 franchisees and some $75 million in annual revenues. Instead of moving everything, Brian Scudamore found his fortune in moving just one thing: junk.

Another frequently-asked question at our seminars and speeches is: “Why don’t you use more small-company case histories?” We should, but the problem is that the small companies that follow the laws of marketing usually end up as big companies.

For the 23 million small businesses in America, we have two rules.

Rule No. 1: Think big. If you’re small and want to stay small, think small. If you’re small and want to get big, think big.

Rule No. 2: Follow the laws of marketing. If you’re a small company, you’ll never get anywhere unless you follow the laws of marketing. If you’re a big company with enormous resources, you can often violate the laws and get away with it.

Not every small business can be turned into a big business, but advertising legend Leo Burnett eloquently made the case for thinking big. “When you reach for the stars you may not quite get one, but you won’t come up with a handful of mud either.”