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A proud entrepreneur hangs out his shingle and launches a new business. He’s smart, energetic, and customer-focused, quickly gaining a rep for top-notch service. Content with just one major client, he learns a brutal math lesson within the first few years of operation. His prime customer shifts accounts to a larger entity, forcing that small business owner to close shop. One minus one equals zero.
I’ve come to witness that tragic scenario play out many times. The cold, hard facts are that too often small business owners tend to subsist with just one product, service, or client. When revenues flow into company coffers, they see no reason to adjust the business model. Limited in size and scope, these doomed micro-companies eventually wind up among the heap of business failures. Over several decades that has been the sad history of many black-owned companies that once dominated targeted segments of hair care, entertainment, advertising, and financial services, among others.
Don’t get me wrong, I’m not here to bash small business. When my father started Black Enterprise, it was a husband and wife with an office and a vision. Over the course of 42 years, BE has championed such ventures, providing them with information and services so they can realize their full potential. We don’t want any African American enterprise to be stuck forever operating on the margins of the business mainstream.
To compete and thrive today you must make your business scalable. For corporate America, less is more. Why? Major corporations no longer dole out a series of contracts to a collection of small vendors. For greater efficiency, they have bundled contracts, shrinking their supplier base and mandating corporate procurement offices identify long-term partners.
For your company to achieve that status, it’s imperative that you embrace the same mindset. By developing the right strategic alliances or joint ventures, your company can, in many cases, increase market share, as well as gain additional financial and human resources to meet client demands. Keep in mind that the major reason large companies grow while small firms often fail–according to the Small Business Administration, more than 50% in the first five years–is that big businesses have deep pockets and powerful relationships that bring opportunities, contacts, and support. You must realize that partnership has such privileges and adopt the new business math: One plus one equals three.
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