Expansion may not be the right path for every small business.
Growth. It’s what our economic system is built on. It’s why the stock market functions the way it does. For so many, growth means success while stagnation means death.
Our entire way of economic thinking requires constant generation of wealth to sustain itself. Capitalism always seeks out new markets and constant growth. For large corporations with shareholders, profits are a must.
Whether it’s a new location or a new group of consumers, the narrative is that businesses must expand to generate wealth, to attract investors, and to continue their success.
That line of thinking leads to pressure on smaller businesses to also expand, even if the timing may not be right. What’s not as often talked about is when growth is not the right path for a company, and what other versions of success look like.
When expanding works
Shavonne Blades, publisher of Yellow Scene, opened up about finding a market in the early days of this magazine. She saw the market changing with the opportunity for a hyper-local magazine. “I’m like there’s 300,000 people moving to East County, and people in Boulder were not paying attention. So I had the perfect opportunity to do what I did. There was nobody out here and I had no competitors.”
She touched on the slow but sustainable growth they were experiencing. “As we made money, I invested it back in the company, that is how we grew the first decade. It’s a very romantic story, someday when there’s a book written about me all that… but at first I never put myself into debt. If we didn’t have the money, we didn’t buy it. It’s really hard to start a business that way. But we did.”
Small local businesses mostly focus on staying afloat, finding success in those first years, and building a customer base. Once early successes are established, new opportunities can arise. Growing along with East County, YS eventually expanded into Boulder County, taking a financial risk.
“That was a great move. My competitors were down, the economy just crashed. It was 2009, they weren’t expecting me to do that,” Blades explained. “I do wish I had stopped there.”
Peter Marcus, Vice President of Communication at Terrapin Care Station, also spoke about their expansion plans. Terrapin had established itself as a local success and was looking to grow. “We were already in Colorado and Pennsylvania, and our expansion plans included Michigan. We were very excited about the market,” Marcus stated.
New opportunities in other states emerged as laws changed. The opportunity to take a successful cannabis brand to a state where marijuana was newly legal meant brand new markets were popping up virtually overnight. The pressure to expand rapidly was immense, yet Terrapin remained true to its roots.
“We have to be one of the very few remaining original cannabis companies that opened in multiple states that stayed privately owned. Almost every company that went to multiple states either went public or sold. So, you know, we’re kind of a unicorn,” Marcus said.
Remaining privately owned has its challenges, of course, but it also offers flexibility that other models do not. Privately owned companies do not need to be as profit and expansion driven as public corporations are.
“Our growth has largely been organic, and when we felt we were getting too big, we held back, whereas with publicly traded massive cannabis companies, once those plans get going, you have shareholders to deal with, boards to answer to,” Marcus explained.
Buck Dutton, Vice President of Marketing at Native Roots Cannabis Company, previously talked about expansion with YS. “I think you have to trust your gut. The numbers are going to tell you everything that you need to know, but you’ve got to have the gut and the intuition to say ‘yes, this is the right time’ or ‘no it is not.’ “
“This is tricky. Very tricky. It can seem like a no-brainer to open another spot when the chips are up, but controlling the quality and process is tough. The people who work tirelessly to create, produce, and provide service are what drive the success, and replicating that same magic in a second spot can be incredibly challenging,” Jamie Lachel owner of Button Rock Bakery shared.
“I think you have to trust your gut. The numbers are going to tell you everything that you need to know, but you’ve got to have the gut and the intuition to say ‘yes, this is the right time’ or ‘no it is not.’”
When expanding doesn’t work
Blades’ success growing alongside East County and moving into Boulder with YS had sparked visions of a second magazine. “I was worried because I realized we only had one revenue stream. If something happened to that revenue stream, I would be through. Most publishing houses have more than one title.”
Opening a second location, or a second magazine in this case, is often a very attractive idea. Diversifying revenue and expanding into a new market is typically seen as a positive path forward. However there is more risk involved than may initially appear.
“I remember as I was sitting there making the decision … I felt like we could absorb and service that kind of debt, but this little small feeling inside of me said ‘you’re not ready,’ “ Blades recalled.
The second magazine was not a financial success. The new staff brought increased payroll. Costs mounted. “Part of me was desperate because I’d already invested a lot in it, I’m also losing money on top of it,” Blades shared.
“The biggest challenges, for me, is maintaining quality while also respecting the workers. So much is asked of us, and yet the time frame remains the same. It’s valuable to remind people that we can only do what we can do in the time allotted, and what we do is enough. Rising costs of ingredients, resources, materials, labor, taxes, fees, etc… make it incredibly difficult to match the perceived value,” Lachel replied.
“The biggest challenges, for me, is maintaining quality while also respecting the workers.”
“For a company like Terrapin, we learned some very hard lessons over the last couple of years,” Marcus opened up. Too many cannabis growers and huge numbers of new dispensaries opening up had forced the price of cannabis to fall. Profit margins for expansion didn’t make sense anymore. Plans to expand into states such as New Jersey and New York were canceled, and locations in Michigan shut down.
“As far as overexpansion, it is really easy to get ahead of your skis, to use some Colorado lingo, and expand too rapidly,” Dutton explained. “I think over-expanding is probably worse than not expanding, not probably, it definitely is worse because it can take your business.”
Sometimes closing down is the right move. “You can’t spend your way to profit. You can’t cut your way to profit either,” Blades shared. She eventually decided to shutter the second magazine and devote to just one title, YS.
Pressure to expand
Societal pressure from the constant bombardment of success stories — real or not — and the near cult-like status that wealthy celebrities gain influences how people think about their businesses. Flashes of dollar signs, franchises, and massive expansion can dance through the head of any small business person that is starting to see some success.
“The thing that happens for franchises is corporate often doesn’t care if they make it, they have these one-size-fits-all templates for these franchises but every market is different,” Blades explained how the franchise model is not always the best one.
Less often talked about are businesses that have seen decades of steady success and decided to stick to what works. Sure expansion is still an option, but things like investing in your employees, raising wages, increasing the quality of what you can offer, and donating to the community are also important factors not as often mentioned on the so-called rise to the top.
One example is our local garden centers. YS recently interviewed owners of Loveland Garden Center and The Flower Bin for an online story who are both finding success in their niches despite “big box” corporations like Walmart also carrying plants.
“The thing that happens for franchises is corporate often doesn’t care if they make it, they have these one-size-fits-all templates for these franchises but every market is different.”
YS found that: “Everything is “all good.” Garden centers aren’t going anywhere anytime soon, because caring for plants isn’t something chain stores excel at. And those of us who love our gardens won’t settle for yellowed leaves and malnourished plants when picking out our newest additions”
Finding steady success rather than looking for exponential growth may be a wise path forward for small business owners. Our capitalist system isn’t going to change anytime soon. Continuous expansion will still be the goal for every company listed on the stock market, but that mindset doesn’t have to pervade every decision, especially on a local level.
Reassessing priorities, and what you define as success, can help lead to a different mindset. “It took me a while and a lot of work, but I realized I never want what’s in my bank account to identify me and value who I am again. Once I kind of grasped that idea I was able to start letting go of a lot of the shame,” Blades shared.
Redefining business success as contributing to the community, providing a service that locals appreciate, and building connections with other business owners and neighbors, can ease the pressure that our profit-driven, Billionaire-worshiping, capitalist society places on us.
Many think the US economy is more productive per person than other developed nations such as France, Germany, or the United Kingdom, yet data from the Organization for Economic Cooperation and Development disputes this by some metrics. As a TIME Magazine article on the subject stated, ”the French have honored a truth long recognized by economists: working longer hours doesn’t necessarily result in increased productivity.”
The focus on productivity and profit comes with a downside not reflected in stock market analysis. Stress, anxiety, and mental health issues are rampant, there is a lack of healthy food, and corporations play a massive role in politics compared to our European colleagues.
“It took me a while and a lot of work, but I realized I never want what’s in my bank account to identify me and value who I am again.”
The mindset of constant expansion is not as prevalent in day-to-day society of places like Western Europe. Increasingly, 30 hour work weeks are becoming more common. Europeans already outnumber us with vacation days at absurd ratios. The French will riot at the drop of a hat if social services are threatened.
Maybe there’s another vision for how to define success. Is success growth or is success sustainability? Does a successful local business only generate profit or does it also add some sort of unseen, uncounted value to the community as well?
“I believe success to be the ability to maintain the business side, while earning the opportunity to participate in the special occasions of the customer. This trust means success. Being selected over other options to provide a service is the best feeling in the world.” Lachel said.
Perhaps it is time to redefine success as quality time with those people you care about, ability to indulge in hobbies and passions, and access to local, sustainable, quality food. Profit should not be the main driving factor.
Expansion is the right move for many businesses, but it is not the only move for all businesses. Setbacks in business do not mean you failed as a person.