Book Summary – The Magic of Tiny Business (You Don’t Have to Go Big to Make a Great Living)
A tiny business doesn’t mean a one-person enterprise with a single, hard-pressed and overwrought entrepreneur working nonstop out of a bedroom while barely covering expenses. A tiny business can make a great income, hire a coterie of employees and enable the owner to maintain a schedule that includes time off and vacations. But, like any company, a tiny business demands paying attention to the basics, setting priorities, being committed and never compromising on your principles.
“A Tiny Business is about building something agile and profitable, on your own terms, so that you…can be home for dinner.”
As you plan your tiny business, you may not know exactly what you want, but you probably know what you don’t want: pressure, stress and around the clock craziness. Tiny business entrepreneurs don’t buy into the idea that commerce is a take-no-prisoners, zero-sum activity. Often a tiny business is the practical embodiment of what its founder wants to achieve in life., as long as that includes seeing challenges as opportunities. These entrepreneurs often find that they can expand their firms at a reasonable pace and that they exert a lot of control. They know growth is good, but “not growth at all costs.”
“Tiny is a laser-focused, disciplined approach centered on making your work work for you.”
Tiny businesses are not merely pathways to paychecks. Owners focus on profit as they learn not to waste time on nonessentials. They want to see their companies grow, but not at the cost of their integrity or their personal lives. These businesses often reflect their owners’ concern about bigger issues. They can be “magical” and bring their founders joy and happiness.
“A new concept may not feel right or ready, and the best way to find out if it has legs is simply…to take that first tiny step.”
Sharon Rowe and Eco-Bags Products
When Sharon Rowe started Eco-Bags Products in 1990, she didn’t realize she was creating a great example of a tiny business or that she could build the company into a multimillion-dollar enterprise. Rowe worked on her own terms, prioritizing her family and her time off for vacations and other activities outside of work.
“Tiny Business is…not an easy, by-any-means-possible, get-rich-quick approach. It is weighted in your values and takes a long view requiring patience and persistence.”
Prior to venturing into the business world, Rowe was an actor. She did well, but earned little money. Then, she had a baby – a fulcrum point in her life. Though she had no commercial training, Rowe decided to abandon her acting career and start a business. Her goal was to make a good living while contributing to making the world a better place. Rowe was determined to ensure that her baby and her family life always came first. She wanted to manage her own time, and she didn’t want to mortgage the present for the future. Her big idea was to introduce the idea of reusable shopping bags to America. She’d first encountered similar bags in France, and she thought the idea was good for the environment.
Tiny Business Satisfactions
Rowe’s new business satisfied her in three important ways:
- “I found something I was passionate about (my ‘why’)” – Rowe knew she wanted to help the environment, in this case, by ridding it of plastic bags.
- “I started a business that was a solution to a problem (more of my ‘why’)” – Plastic bags do a lot of ecological damage.
- “I used my own resources (my ‘how’)” – Rowe spent her own money to bootstrap her new business. She relied on credit cards to get over the tough spots.
“If you…want your work to matter and you want to make a good living, or you want to build your own business while keeping family and other life experiences a priority – then a Tiny Business is for you.”
Rowe gave herself three months to make Eco-Bags Products work. After that – if it didn’t work out – she’d have to find another job. She asked shopkeepers near her home if they liked the idea of reusable shopping bags. Many did. She lined up a German manufacturer to produce the bags she had in mind.
“I didn’t want to pay to play…I was unwilling to make compromises to work up the corporate ladder.”
On Earth Day 1990, Rowe launched her tiny business. She offered Eco-Bags for sale at a street fair on Sixth Avenue in Manhattan. She sold out her entire stock in four hours. This street exposure led Newsday to mention Eco-Bags in an article. This valuable publicity spurred massive mail-order sales. Soon, Eco-Bags Products was profitably partnering with Stow Mills, a giant natural-products distributor. Rowe’s new business was off and running. Then she discovered a basic truth about her new enterprise: Her products weren’t running the show. Consumers were driving it by reacting positively to her company’s aspirational story, its purpose, product and positive impact. Rowe began to participate in natural-products trade shows. This paid off in new business touchpoints from retailers and marketers.
“Put your vacation time on your personal and work calendars with as much notice as possible.”
Then Came Oprah
In 2006, sales of Eco-Bags Products went through the roof when The Oprah Winfrey Show featured them on a telecast. Rowe had decided to hire a PR firm and spend big money – $4,000 monthly for four months – to get her product mentioned on Oprah. The occasion was the first show that Winfrey devoted to Earth Day. The show’s positive publicity pushed revenues for Eco-Bags Products from $700,000 to $2.2 million annually. To handle the increased business, Rowe hired three new employees and moved her firm to a bigger, more costly office.
“You need to be able to pivot quickly. Agility matters. If an opportunity comes your way, your ability to respond quickly is important.”
However, things were not always rosy for Eco-Bags Products. The company was careless with expenditures. It didn’t produce forecasts and budgets. It didn’t prepare for the future. When the Great Recession hit, it couldn’t have come at a worse time for the company. Rowe’s firm was overextended. Eco-Bags Products had no cash reserves. Its revenues fell by half. To deal with this distressing situation, Rowe hired a new CEO, Alan Shapiro, a capable executive with a strong reputation and vast experience. She cut her own salary to zero. Eco-Bags Products reached out to its partners, suppliers and customers, brought them up to speed on the business impact of the recession, and explained the steps it was taking to turn things around.
“To get out of a practice that may be hindering you…replace it with a new one that is enjoyable and rewarding.”
Once Eco-Bags Products moved beyond the recession, Rowe hired Mac McCabe, a former L.L. Bean executive, as the firm’s “go-to financial guy and forecaster.” With McCabe on board, Eco-Bags Products bases its business decisions on forecasts and margins. As McCabe explains, “If you understand your numbers and how those numbers impact results, you will almost always improve your odds for success.”
“If your business failed, talk…about why it failed and what you know now that you didn’t know then.”
When Competition and Cooperation Combine
Like many other companies, Eco-Bags Products took a big financial hit during the recession. However, it had already carved out a viable position in the marketplace. As a result, other firms began to enter its sector. Rowe’s company welcomed these competitors to join Eco-Bags Products in “cleaning up the planet one bag at a time.” Eco-Bags Products executives based their decision to act this way on a “co-opetition” strategy that puts competition and cooperation together.
“What if they sell and promote our brand and we do the same for theirs?…What if we take a cooperative, generous stance and ask the same of them? What if we practiced co-opetition?”
Onyeka Obiocha, director of innovation for Yale’s Center for Public Service and Social Justice, developed this concept. As an example of how cooperating with the competition can work, Eco-Bags Products sold and promoted its rivals’ bags, and they did the same for Eco-Bags Products. By partnering with them, Eco-Bags Products made it easier for its customers to depend on its brand for all their “reusable bag needs.” That’s a big win for all involved, including the environment. Rowe believes, “It’s a losing proposition to try to own a whole category.”
Tiny Business Insights
Rowe learned valuable lessons and gained practicable insights as a tiny business entrepreneur:
- Watch your timing – Don’t start a new business when you are under pressure or have your hands full with other matters.
- Take tiny steps– Incrementalism is a watchword for any tiny business.
- Do cooperative marketing– Target brands that work with yours for co-marketing.
- Stay ready for downturns– To prepare, increase your cash flow, take your foot off the accounts-payable pedal, press down hard on the accounts-receivable pedal and ask suppliers for extended terms. Be transparent with your employees, especially if you must cut back on their hours.
- Prioritize what you must do over what would be nice to do– Your time is precious. Focus on needs, not niceties. Choose “just fine” over “perfect.”
- Heed the 80/20 rule for tiny businesses– For every 80% of good results, allow yourself 20% to “trip, stumble, or fail and reboot.” The rule means “20% of your customers make 80% of your purchases” and “20% of your advertising delivers 80% of results.”
- Make weekly checks– Monitor your personal and professional priorities on a weekly basis. Doing it daily is even better.
- Control cash flow – Without cash, your business will fail. To monitor cash flow, calculate predictable expenses “in advance against a forecast with historical figures.”
- Measure your risk tolerance– To assess your risk-tolerance, ask: What is your current level of financial security? How long do you expect it will last? How much money do you need to operate? Will this change in the next few months? Can you afford to lose money? How much could you lose before you’d be in trouble? Can you go without money now? If so, how much? If the money stops, can you still have a reasonable life?
- Enlist legal and accounting professionals – Retain an intellectual property attorney to protect your trademark and similar rights. Guard your brand. Hire an accountant and, if applicable, form a partnership with a manufacturer. Every firm needs a bookkeeper to organize its record keeping and a CFO to handle forecasting and budgets.
- Protect yourself legally– Never depend on oral agreements. Register your brand in all of its variations. For example, Eco-Bags Products registered “Eco-Bags, Eco-Bag, ECOBAGS” and “ECOBAG.” Create a Google Alert that will monitor the Internet for appearances of your trademarks. Prepare a cease and desist letter and send it if someone transgresses your trademarks.
- Put profits back in the firm– Your profits are your income minus your expenses and salary. Don’t spend your profits on yourself. Invest them in your business. Set up a pro forma, a projected monthly income statement detailing your revenues and expenses.
- Set up basic “brand assets”– You need a LinkedIn profile, a two-sentence business summary, a 120- to 150-word professional biography, a 300-word professional biography, a head shot in high- and low-resolution formats, and a commercial website.
- Compete for awards– The more exposure you secure, the better. Do your best to win commercial awards. Nominate yourself, as Rowe did.
- Preserve your free time– Block out time in your schedule. Allow plenty for vacations.
- Attend trade shows and conferences– Participate whenever and wherever you can. These gatherings provide business connectivity.
- Prepare for the future– Maintain low overhead expenses. Heed forecasts. Don’t expand until you’re sure you’re ready. Save for emergencies. Create positive relationships with banks for easy access to loans.
“When you set out in a direction, with purpose and intention, opportunities tend to arise that are in sync with what you’re doing. Like magic.”
Share Your Business Experience
Share your success story with other tiny business entrepreneurs. Think of this as participating in a cycle of courteous reciprocity. Speak publicly about your tiny business. The most effective way to share your experience is to tell stories, which will resonate with your audience more powerfully than facts and figures. Share your knowledge by mentoring or coaching entrepreneurs who are beginning tiny businesses. Deliver speeches about your tiny business at local universities, civic clubs, libraries and chambers of commerce. Take any opportunity that come your way to spread the “magic of tiny business.” This will be effective advertising for your enterprise, and you may inspire others to start their own tiny businesses.