Small businesses: lessons on how to survive — and thrive

More and more Americans have been opening small businesses in the U.S. over the past few years, according to a recent report from the Global Entrepreneurship Monitor. Nearly 13 percent of Americans are involved in early-stage entrepreneurial activity – including brand, new start-ups and young firms formed in the wake of the Great Recession. But studies show many of them won’t survive. Another report from the U.S. Small Business Administration found only one-third of small businesses are still around in 10 years.

While the idea of being your own boss while pursuing your professional passion is increasingly alluring to many workers, most entrepreneurs will tell you that it is much easier to start a business than to stay in business. And, a key lesson that is essential for many small businesses to not only survive, but thrive, is often one that is most difficult to master.

Maintain a singular focus

Small businesses often lose focus, even successful ones.

In 1999, Jason Fried founded a web design company 37Signals, which became well-known in tech circles for its many software products. “We’ve been in business for 15 years… the mass of your business gets larger and larger,” Fried said.  “You do more things, take on more people, you build more products.There’s always more stuff that’s happening.”

But over the past decade, its most popular product, Basecamp, had become a leading project management tool around the world, allowing users to share files, have discussions, and collaborate on documents. This single product was responsible for the majority of the company’s revenue and profits. So earlier this year, Fried streamlined the business to focus on that product and renamed the firm Basecamp to reflect its top brand.

“We decided at the moment of having a great business, let’s make this decision now so we can get focused again,” Fried said. “It’s really tempting to keep wanting to do more and more and more stuff. But it’s really, really hard to do more than one thing well. ”

Pivot to profit

A change in direction can also save a small business. It’s become a bit cliche among startups, but “pivoting” – when done properly – can be critical to the success of new and old companies.

Alexa von Tobel, founder and CEO of, started her company with herself in mind. “I was client number one. We were in the heart of the recession. I had this big dream of making financial planning a mass consumer product, as accessible as a gym membership,” she said.  Her target audience was women, but her business model of providing automated financial planning tools and advice to consumers at affordable prices garnered attention — and funding — from venture capitalists as well.

“When you start to grow and you start to take investor money– they’ve had five rounds, raised over $72 million — you have to think about growth and you have to think about scalability. And the fact is you have to think a little bit bigger,” said Michael Parrish DuDell, an entrepreneur and best-selling author of Shark Tank Jump Start Your Business.

In 2012, von Tobel made a change. She pivoted and decided to expand her target audience to include not only women, but a broader group of consumers seeking low-cost financial planning. “We’re going after the 99% of America that doesn’t get access to great advice,” von Tobel said.

“They changed their model to a broader audience,” DuDell said. “They’re thinking very clearly about what it means to have a customized product that speaks directly to that audience member.”

Design a leaner plan

Survival rates improve for a given business over time – but even those that are initially able to weather a downturn may feel the crippling effects down the road, according to a 2012 SBA report. Several estimates show the U.S. lost more than 170,000 small businesses during the Great Recession. Ones that survived — and many of those that have started since then — are careful not to repeat past mistakes. Their companies are leaner, more focused and less risky. One of the most important lessons entrepreneurs have learned from the financial crisis: Streamline the business.

The design and brand building consultancy firm, Federation Design Studio, had many good years, but co-owners Roberto and Colleen Crivello said 2008 was the defining moment  — a critical juncture when many other small businesses went out of business.

“Huge companies were laying people off and it was a big deal in fashion, because it is fashion and it’s one of the things that people cut from their budgets probably right away,” Colleen said. In order to stay afloat, the Crivellos retooled their business to operate virtually – by letting go their full-time New York-based employees and hiring designers from all over the country on a project-only basis. FDS cut down on overhead cost and expensive, unnecessary workspace – resulting in a leaner, more efficient business.

“They could have gone under and instead they were able to adapt,” DuDell said. “The smart entrepreneur, whether they’re very successful or just starting out, knows that they should keep overhead as low as possible. The digital age has really created incredible opportunities for people to manage virtually and keep their overhead quite low.”

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