Afterword: Never Grow Up

Company Of One: Why Staying Small Is the Next Big Thing for Business - Paul Jarvis 2019


Afterword: Never Grow Up

There’s a hotel nestled in the picturesque countryside of Japan’s Yamanashi prefecture, the Nishiyama Onsen Keiunkan, which is the oldest continuously run hotel in the world. It has been in existence for about 1,300 years (it opened its doors in AD 705) and managed by fifty-two generations of the same family.

Empires have risen and fallen around Onsen Keiunkan, great wars have ravaged it, and massive economic booms and busts have come and gone. Still, the hotel has endured and remained profitable enough to stay open for business. The hotel has thirty-five rooms and access to six natural hot spring baths, which are open 24/7 to better serve their guests. The water of the baths is pure, alkaline, and neither artificially heated nor treated. The hotel serves simple, seasonal food, locally sourced from the surrounding mountains and rivers. Besides the baths, there are no other attractions in the nearby area, and there’s definitely no wi-fi or ride-sharing. Still, it’s been a popular destination for far longer than any of us (or our great-grandparents) have been alive. Guests have included emperors, politicians, samurai, and military commanders.

The hotel’s focus, since the beginning, has been on customer service, not on growth or expansion. It’s stayed small because the top priority has always been making guests comfortable.

How the Onsen Keiunkan has succeeded by not choosing exponential growth is a story best told by looking at its peer: the oldest continuously run business in the world, Kongō Gumi, a Buddhist temple construction company. The founder, Kongo Shigemitsu, saw an incredible opportunity: Buddhism was catching on quickly, and so temples needed to be built. For the next fourteen centuries (i.e., long after the founder’s death), the company kept busy building temples. Like their hotel peer, Kongō Gumi kept a relentless focus on serving customers and being absolute experts at their craft, and that focus enabled the construction company to be resilient enough to endure.

For 1,428 years, Kongō Gumi hummed along as a construction company. Things suddenly changed, however, when they decided to expand into real estate during a boom in the Japanese market in the 1980s due to an epic financial bubble and unconstrained credit growth. For a while, Kongō Gumi reaped the short-term rewards of fast growth, but as so often happens, that growth wasn’t sustainable.

By the start of the 1990s, the financial bubble had completely burst in Japan. Companies that took on vast amounts of borrowed money with artificially suppressed interest rates were left with nothing but debt. Debt was like a popular drug—everyone was doing it and every business seemed to have access to it.

Kongō Gumi ended up with close to $343 million in debt. It was sold to a larger company and ultimately liquidated a few years later—bringing its extremely long run as a company to an end. The temple construction company had survived countless political crises, two atomic detonations, and even a period when the Japanese government set out to eradicate Buddhism from Japan completely. But ironically, what they couldn’t survive was the cost of rapid growth. Their downfall was putting growth above stability and profit.

In Japanese, shinise is the word for a long-lasting company. Interestingly, about 90 percent of all businesses worldwide that are more than 100 years old are Japanese. They all have fewer than 300 employees, and the ones that still exist never grow quickly or without great reason.

Onsen Keiunkan, by contrast, has barely grown at all. Still operating with fewer than forty rooms and six hot springs, they’ve survived by recognizing that growth isn’t required for long-term success. Making every customer feel like they are the one and only customer, the hotel has been dedicated to service in a way that has drawn intergenerational patronage (which isn’t something many companies ever see). They have done some updating, of course, redoing the rooms in the 1990s and digging a new well, but these iterations have been slight and carefully thought out.

Onsen Keiunkan has survived, not in spite of being small, but because of it. They didn’t expand into a hotel chain, or turn their interests to real estate investing, or follow the whims of market booms. They haven’t taken on investors or gone public.

To put this all into perspective, Richard Foster, a lecturer at the Yale School of Management, found that the average life span of a business on the S&P 500 is only fifteen years total.

Onsen Keiunkan, on the other hand, has been in business and operating for 1,300 years.

BECOMING TOO SMALL TO FAIL

The ideas, research cited, and lessons in this book point to a broader philosophy of business achievement: business success does not lie in growing something quickly and massively, but rather in building something that’s both remarkable and resilient over the long term. This isn’t to say that success happens only after the first millennium has passed, but that success is about finding a way to sustain a business as long as it needs to be sustained. As we’ve seen time and time again, nothing is too big to fail. With bigger scale come bigger dangers, bigger risks, and much work to become and remain profitable.

Instead, you can focus on building something that, in effect, is too small to fail. You can adapt a small company of one to ride out recessions, adjust to changing customer motivations, and ignore competition by being smaller, more focused, and in need of much less to turn a profit.

Success, then, ought not to be measured by quarterly profit increases or ever-growing customer acquisition, or even by your ability to create an exit strategy and leave with more than you entered with. Instead, as Natasha Lampard of the popular internet conference “WebStock” says, you can focus on an “exist strategy”—based on sticking around, profiting, and serving your customers as best you can. Your success can be measured by being profitable quickly as you stay small and build real relationships with your customers—not because you’re an altruistic hippie, but because it pays off over time. Long-term, loyal customers will sometimes hang around for generations, continuing to financially support your business.

A better problem to solve—one that requires real ingenuity—is how to avoid dealing with everything that comes up by just adding more to the mix. Solving business problems by simply adding more is like putting a Band-Aid on a cut—yes, it might stop the bleeding, but covering it up doesn’t help you deal with why the cut happened in the first place. To add more is basically an effort to fix an existing problem without first looking at its cause.

If you figure out why you need more, you can come to better conclusions, ones that might actually help both your business and your customers. Maybe you can turn down growth that doesn’t serve your company. Maybe you can create and sustain a tiny business that doesn’t overwork you or your staff and doesn’t ignore customers and still profits wildly. Maybe instead of taking investments to grow, you can remain the same size.

Instead of solving problems with more, perhaps you can determine what is basically enough. Ricardo Semler, whom I quoted at the start of this book, believes that profit past the minimum isn’t essential for business survival. He likens going for profit at all costs to seeing a jail with empty cells and assuming that not enough prisoners have been rounded up yet. In effect, what’s best for the government that runs the jail isn’t a spike in the crime rate so that more people can be punished, but a greater effort to make sure crime doesn’t happen in the first place, thereby creating more taxpayers and more profit for them.

My mind keeps coming back to the two studies showing that growth is the main cause of failure in so many startups, and even many top corporations. The truth is, very few startups last for a long time. Most of them don’t even last a few years let alone fifteen years, and certainly not 1,300 years. When they grew, many of them simply became too big to succeed. Big companies can find it so much easier to fail, with their higher burn rates, the rampant acquisition they require to hit profitable status, and their huge teams full of people you hope are pulling their own weight, but who knows? There are too many people on them to know for certain.

Determining what is enough is different for everyone. Enough is the antithesis of growth. Enough is the true north of building a company of one, and the opposite of the current paradigm promoting entrepreneurship, growth-hacking, and a startup culture.

Growth, as we’ve seen from the studies and stories presented in this book, is not an unalterable law of business. Instead, growth doesn’t have to inevitably follow success or profit, especially for a company of one. When you become too small to fail, you also become small enough to make your own choices about your work. Real freedom is gained when you define upper bounds to your goals and figure out what your own personal sense of enough is. You’ll have the freedom to say no to doing the expected, or to opportunities that don’t serve you.

There’s a satisfaction in reaching the point of enough in your business, and then knowing that you don’t have to explore every new potential opportunity that comes up. This freedom allows you to run your company of one in your own way—a way that gives you a life you enjoy, fills your days with tasks you actually want to do, and brings you customers you actually want to serve.

THIS IS JUST THE BEGINNING

This book has been an exploration of the concept of a “company of one” by looking at research and examples of people who have asked, “What if . . .?” What if growth doesn’t matter? What happens when we put an upper bound on our goals? What if business and capitalism itself are turned on their head?

As I started out on this journey to explore companies of one, I figured I was alone in my belief that growth isn’t always the best course of action for business. But then, as I explored the idea more, I realized that a silent movement is happening. Companies of one around the world are starting to succeed, making substantial profits, without rapidly hiring employees or taking venture capital. Companies like Buffer and Basecamp are thriving and profitable, and people like Tom Fishburne and Danielle LaPorte are challenging the status quo and building smaller but amazing businesses.

Remember that technically everyone is a company of one—or at least, they should be. Even if you lead a team at a business that isn’t yours, or you are an employee at a massive company, no one else truly cares as much about your career as you do. Indeed, it’s your sole responsibility to look out for your own interests, and it’s up to you to define and then achieve whatever success means to you.

Most of us know that the perception that being an entrepreneur is riskier than being a corporate worker is misguided, since at a large corporation these days employees have little control as to how it’s run, how it focuses on profit (or on growth), and how secure their jobs really are. Yes, starting something on your own can be a little risky too, but I’ve found that most entrepreneurs are the most risk-averse people I know. They iterate on ideas and move slowly when it comes to risk, but move quickly to create profit (since they need profit in order to pay themselves).

By becoming a company of one, or just by adopting the key aspects of this mind-set, you can develop the resilience required to thrive in any job, at any company, or with any project or business you start on your own. By making sure your business works when it’s as small as possible, you can ensure that it will work if and when it grows.

There’s a point—and it’s different for everyone—where you realize that having more won’t affect your quality of life. When your “enough” happens, it should be liberating. What’s the difference, really, between having $90 million and having $900 million? (Honestly, I wouldn’t know.) If you’re not sure you’ve reached that point, question why you want more, or why what you have isn’t enough.

Accepting the mind-set of a company of one doesn’t have to be an either-or decision. Don’t feel that you have to take it or leave it. Instead, I challenge you to consider how specific ingredients in the overall recipe put forward in this book could benefit the way you work or the way your business operates. Perhaps you can adopt some ideas and leave the rest. As long as you’re questioning concepts and determining what’s best for your own business and customers, I’ll be happy.

Today more than ever, behemoth corporations need to learn how to be more nimble and maverick, more like a company of one. And people who are just starting down their own path, toward their own business, need to know that there’s another path forward. In fact, there are infinite paths, and unless you start asking questions about each pathway, you may not enjoy where you end up.

Everything in this book derives from my belief that all companies, of every size, should be “lifestyle” businesses, not trapped in the paradigm of how “real” businesses operate. In fact, every business, theoretically, is a lifestyle business, in that each represents your choice of how you want to live. If you want to work in the fast-paced corporate world, you have to accept that your life will have little room for much else. If you choose the growth-focused venture capital world, you have to accept being beholden to two groups of people: investors and customers (and what each wants could be vastly different). And if you work in a company where enough profit is acceptable, then your lifestyle can be optimized for more than just growing profit.

In sum, all business is a choice about the life we want outside of it. One choice isn’t better than any other; all are simply choices, guided by our own internal and deeply personal factors. This book presents one choice. It may not be the choice you’d make on how to run your life and your business, but if it is, I hope that this book has given you both a bit of insight and a small light to guide you.

There’s only one rule for being a company of one: stay attentive to those opportunities that require growth and question them before taking them. That’s it—one rule. The rest is entirely up to you. But if you ever stop questioning the need for growth, you run the risk that the beast of growth will devour you and your business whole.

The company-of-one movement is constantly growing (bad joke, I couldn’t help myself). If you’ve got a company-of-one story of your own to share, I’d love to hear it (paul@mightysmall.co). I read every email and reply to as many as I can—I promise.

The more products, the more markets, the more alliances a company makes, the less money it makes. “Full speed ahead in all directions” seems to be the call from the corporate bridge. When will companies learn that line extension ultimately leads to oblivion.

—AL RIES AND JACK TROUT,

The 22 Immutable Laws of Marketing