There are two types of companies in the business world: small giants and big fish. The small giants are the businesses that have chosen to stay small and focus on quality instead of quantity. They believe this is the better business strategy and succeed because of it. The concept of small giants comes from Bo Burlingham’s book of the same name.
In it, he discusses why small businesses are often more successful than their larger counterparts. From my interview with Rob Dube, Co-Founder and Co-CEO of imageOne, a document management solution company, and the author of ‘Do nothing: The Most Rewarding Leadership Challenge You’ll Ever Take.’ Rob is also the co-founder, with Gino Wickman, of an organization called The 10 Disciplines, which teaches business owners a proven process to help people maximize their energy and help them live their optimal life. I have compiled the following on small giants, choosing great over big. This blog post will discuss the small giant philosophy and how it can benefit your business.
What is a Small Giant?
The small giants are the businesses that have chosen to stay small and focus on quality instead of quantity. They believe this is the better business strategy and succeed because of it. The concept of small giants comes from Bo Burlingham’s book of the same name. In it, he discusses why small businesses are often more successful than their larger counterparts.
The small giant philosophy is all about choosing quality over quantity. Businesses should focus on providing a great customer experience rather than trying to serve as many people as possible. While this may seem counterintuitive to run a business, it makes a lot of sense. When businesses prioritize quality, they tend to be more profitable. They also have lower employee turnover and can better weather economic downturns.
So if you’re looking for a business focused on quality over quantity, you should definitely consider becoming a small giant. You’ll be glad you did!
What is the Small Giants Community?
Robe Dube being part of the community, explains it as a professional business network for purpose-driven executives who want to learn new methods and systems to implement in their own businesses. There are no membership fees involved with the Small Giants Community — instead, there are three primary ways to participate: study from Small Giant PDFs and other resources, attend the annual Small Giants conference, and join small groups of peers (called “Giants Circles”) that meet regularly to support and challenge each other.
The Small Giants Community is open to any business leader who is looking for an alternative way to run their company. Whether you’re a small business owner, CEO, or president, you’ll find valuable resources and support within the Small Giants Community.
Suppose you’re interested in learning more about the small giant philosophy or looking for a supportive community of like-minded business leaders. In that case, we encourage you to check out the Small Giants Community today!
Qualities of Small Giant Companies
The small giant companies that have been studied all share some common qualities. They are:
The Leader Factor
It is widely accepted that solid leadership is a critical ingredient for any organization’s success. While this is undoubtedly true, it is also important to note that not all leaders are created equal. In particular, the leaders of so-called “Small Giant” companies exhibit unique qualities that enable them to achieve extraordinary results.
First and foremost, leaders of Small Giant companies are highly self-aware. They clearly understand what they want to achieve with their business and are also aware of the deeper purpose that drives their actions. This self-awareness allows them to lead their organizations more effectively without sacrificing the things that matter most.
In addition, Small Giant leaders are passionate and committed to their teams. They know that creating a great company requires the best efforts of everyone involved, and they work tirelessly to inspire and motivate their employees. This passion and commitment often lead to a deep sense of loyalty from team members, contributing to the organization’s long-term success.
Finally, Small Giant leaders are always learning. They realize that the world is constantly changing, and they adapt accordingly. This ability to learn and change means they are always ahead of the curve, giving them a significant competitive advantage.
The Community Factor
Being a good corporate citizen is not just a PR strategy for Small Giant companies – it is part of their core values. These organizations are part of the local landscape and are mindful of their actions’ impact on the community. They work to create a virtuous cycle of support, where the community relies on them as much as they rely on the support of the community.
In this way, they can create long-term relationships of trust and mutual benefit. As a result, Small Giant companies are not only good neighbors but also good stewards of the local economy.
The Customer/Supplier Factor
One of Small Giant companies key qualities is how they nurture their relationships with customers and suppliers. Unlike many large corporations, Small Giants consciously look for values-driven partnerships and treat those relationships with the utmost integrity. This commitment to customer and supplier relations has several important benefits.
First, it creates a support network of like-minded individuals and businesses that can be relied upon in good times and bad. Second, it helps to build trust and loyalty, which are essential for long-term success. Finally, by nurturing these relationships, Small Giants create a competitive advantage for themselves—one that is based on trust, respect, and mutual understanding.
Employee retention rates are incredibly important for any company. Not only does it save money in the long run, but it also creates a more stable and productive workforce. Small Giant Companies are known for their high employee retention rates. This is because they have an’ employee first’ approach to business.
They recognize that to be a truly great organization, their employees need to be happy and advocates of the business. As such, they invest heavily in their employees’ happiness and wellbeing. This includes offering competitive salaries, comprehensive benefits packages, and a supportive work environment. In return, their employees are highly loyal and passionate about their work. As a result, Small Giant Companies can create a stable and productive workforce, which is essential for long-term success.
The Margin Factor
Small Giant companies realize there is more to success than simply increasing volume and top line revenue. These innovative businesses have sustainable models that protect their gross margins.
By keeping a close eye on expenses and focusing on quality over quantity, Small Giants can maintain a healthy bottom line. This allows them to reinvest in their products and employees, creating a virtuous growth cycle. In addition, Small Giants tend to be nimble and adaptable, another key quality contributing to their success. By being open to change and willing to experiment, these companies can stay ahead of the curve and remain competitive in today’s ever-changing marketplace.
The Passion Factor
The owners and leaders of Small Giant companies are passionate about what they do. They have a deep love for what they do, which gets them out of bed in the morning and enables them to maintain their passion through highs and lows. Their passion is evident in their commitment to their work and their continued efforts to improve their products or services.
It’s this passion that sets Small Giant companies apart from other businesses. When customers can see that the company cares deeply about its product or service, they’re more likely to trust the company and become loyal customers. This passion is also contagious and often rubs off on employees who are more motivated to do their best work. Ultimately, the passion of the owners and leaders of Small Giant companies is what sets them apart from the competition and helps them thrive.
Growth isn’t the Only Measure of Success
It is often said that growth is the only way to measure success. However, this is not always the case. While growth is certainly an important metric, it is not the only thing that matters. Sometimes, a company may be doing very well in terms of revenue and profit, but its workforce may be unhappy, or its products may be of poor quality. In these cases, growth is not indicative of success. Instead, success should be measured by a combination of factors, including growth, profitability, customer satisfaction, and employee satisfaction. By looking at all of these metrics, you can get a more holistic picture of how a company is performing.
If you’re a business owner, then you know that there are a lot of moving parts that go into making your company successful. From sales and marketing to operations and finance, keeping track of everything can be challenging, especially if you’re unfamiliar with all aspects of running a business.
That’s where a fractional CFO comes in. Fractional CFOs are experts in financial management, and they can help your business make the most of its money. From my interview with Nelson Tepfer, the managing partner at ProCFO Partners, which provides fractional CFOs across New York state and Chicago, I have compiled the following on what fractional CFOs are and how they can help your business grow. I’ll also give you tips on deciding if hiring a fractional CFO is the right move for you.
What is a Fractional CFO?
A Fractional CFO is a Chief Financial Officer who works part-time, usually for small to mid-sized businesses. This type of CFO can be an excellent option for companies that can’t afford a full-time CFO or only need someone to handle financial matters part-time.
The CFO is the strategic and managerial head of finance, and they can be critical allies for founders without a financial background. The CFO can set and review financial key performance indicators (KPIs), implement best practices, create budgets and forecasts, and assist the board and potential investors in understanding the company’s financial status.
Many startups are unable to afford a full-time CFO. An outsourced CFO service might assist you in understanding your company’s finances, producing customized forecasts, or formulating a fundraising approach for a short or one-time engagement.
What is the Difference Between a Fractional CFO and an Interim CFO?
According to Nelson Tepfer, a temporary CFO differs from a fractional CFO (part-time CFO) because the interim job is short-term. An interim CFO fulfills an area between a company losing its full-time CFO and filling the vacant position. A fractional CFOs’ services are continual, but their weekly hours are limited to part-time.
Fractional CFOs are often considered more strategic, while Interim CFOs are more operational. Fractional CFOs work with a company to help them grow and scale, whereas Interim CFOs help to keep the company running smoothly on a day-to-day basis.
Another key difference is that Fractional CFOs are usually brought in when a company is doing well and looking to take things to the next level. In contrast, Interim CFOs are typically brought in during times of crisis or transition.
What does a fractional CFO do for Growing Businesses?
A fractional CFO is a crucial functionary who serves many responsibilities in a business, including:
Ensure a Proper Financial Foundation is in Place
As a company grows, its financial processes grow increasingly complicated for the founders to manage. They need someone who can see the whole picture through the nuts and bolts of financial reporting and accounting to maintain their economic health.
This is where a fractional CFO comes in to clear a path through the web of numbers and statistics.
Nelson shares that “as the lifeblood of every small business, cash flow can be a big issue. Small businesses may struggle with getting funding, building their company strategy, and figuring out why their profit margins are shrinking. These are all symptoms of bigger problems that a fractional CFO can help with. A fractional CFO brings experience and expertise to recognize symptoms and build a financial function that will support the business’s goals. This can help small businesses get back on track and be successful.”
A fractional CFO is vital for small businesses, as they provide the financial stability and foresight required to maintain a company’s health and growth.
Help Manage Growth
One of the main benefits of having a fractional CFO on your team is that they can help manage growth. If you’re seeing consistent growth in your business, it’s essential to have someone on your team who knows how to handle that growth and ensure it’s sustainable. A fractional CFO can help you do just that.
For instance, when looking at a potential acquisition, it’s essential to look at more than just the numbers on paper. It would be best to consider how the company would fit with your existing business. Would the acquisition help you to achieve economies of scale? Would it give you access to new markets or technology? What would be the impact on your existing employees? These are all important factors to consider before making an offer. Of course, you also need to ensure that the company is a good financial fit for your business. But by taking a holistic view of the acquisition, you can avoid making a mistake that could cost your business dearly in the long run.
These are the considerations a Fractional CFO can bring to the table to ensure that you make the best decision for your business.
Implement Systems and Controls
When businesses grow, they must create more effective procedures to address their fluctuating needs. This necessitates the oversight and direction of someone who has implemented numerous systems in various situations. Someone who’s seen it all can anticipate what might go wrong and how to address it before it happens. A fractional CFO may draw on their experience to guarantee that the business is always moving forward, even when changes occur.
For example, there was a company whose invoicing process was inefficient. It would often take them four to six weeks to send out an invoice after completing a project. Nelson recognized this was a legacy issue from when the company was much smaller. At that time, a single person was responsible for a checklist of six items that needed to be completed before an invoice could be sent out. As the company grew, those six items became the responsibility of six different people or teams. However, no one took the time to reassess whether this was still the most efficient way to do things. As a result, being a fractional CFO, Nelson helped them implement systems to streamline their process so that invoices could be sent out within five days. This helped improve their efficiency and better meet the needs of their clients.
To Sum Up
A fractional CFO is a financial expert with an extensive background in many areas who works part-time and relieves startups of high expenses. Hiring a fractional CFO is the only way for a young business to gain access to best-in-industry knowledge without having to pay through the nose for it.
It’s a win-win situation like all great business models.
Of course, once startups grow large enough, they may find that having a full-time CFO makes good business sense. Those who are still learning the ropes, on the other hand, should think about employing a fractional CFO at any time.
Cognitive bias is a term used in psychology to describe how our personal biases influence our thoughts, feelings, and behaviors. These biases can harm business when they lead us to make decisions based on inaccurate information or assumptions. From my podcast interview with Dr. Gleb Tsipursky, a cognitive neuroscientist and a behavioral economist, author of best-selling books, amongst them is Never Go With Your Gut and the founder and CEO of Disaster Avoidance Experts. I want to explore three cognitive biases in more depth and share some tips on overcoming them.
What is Cognitive Bias?
The idea of cognitive bias was formed in the 1970s by Amos Tversky and Daniel Kahneman, psychologists who studied why people have trouble reasoning and judging fairly in particular circumstances. Paul Slovic, a psychologist, collaborated with them on their early findings, which they published in “Judgment Under Uncertainty.”
Cognitive bias is a term used to describe certain mental mistakes caused by our limited capacity to analyze information objectively. It can result in illogical and baseless judgments and an inability to assess risks and threats.
The researchers explained that cognitive bias is the inclination to make judgments or take action illogically due to our attitudes, memory, socialization, and other personal traits. There are several biases that have an impact on a wide range of activities, including decision-making, evaluation, beliefs, and social interactions.
According to Dr. Gleb Tsipursky, cognitive biases are “mental errors humans make in processing information because of how our brains are wired. These lead to judgments that deviate from a rational and unbiased perspective.”
Cognitive biases can be subtle and hard to detect, which is why it’s essential to be aware of them. Here are some common cognitive biases that Dr. Gleb discussed:
3 Cognitive Biases Hurting Your Business
There are many different cognitive biases, but here are four of the most common ones that can hurt your business:
The planning fallacy is a cognitive bias that leads people to underestimate the time, costs, and risks associated with future actions. Kahneman and Tversky first proposed the planning fallacy in 1979. They explained the phenomenon by suggesting that people focus on the most optimistic scenario for a task rather than using their experience of how long it actually takes.
The planning fallacy occurs regardless of our experience with similar tasks in the past. Even though we know the task has always taken longer to complete, we still underestimate the time it will take in the future. This bias can lead to problems because it can cause people to Undertake projects without realistic expectations about the time and resources required.
As a result, the project is more likely to be delayed, over budget, and less effective than initially predicted. The planning fallacy is a common source of error in personal and organizational decision-making, and it’s important to be aware of it to avoid its effects.
This is evident in Dr. Gleb’s example of an entrepreneurial company that opened to address the issue of the planning fallacy. They were making overly optimistic estimates on how much something would cost when bidding for a heavy manufacturing project. This often led to underbidding by millions forcing them to make fewer profits than anticipated. The reason why this happened is that they didn’t take into account their previous experiences with similar projects. In other words, they didn’t have a reference point to go off of and cognitively biased themselves.
One way to overcome the planning fallacy is by using reference class forecasting. This is a method of estimating the probability of future events by looking at similar events in the past. Using this method, we can avoid cognitive biases and make more accurate predictions.
Sunken Cost Fallacy
The sunken cost fallacy is a cognitive bias that dictates our decision-making. It tells us that we should continue investing in something as long as we have already invested so much, regardless of whether or not it is actually worth our time or money. This bias can lead us to make suboptimal decisions in our personal and professional lives.
For example, we may stay in a dead-end job because we have already put so much time into it, or we may continue investing in a failing business because we can’t bear to see our initial investment go to waste.
The sunken cost fallacy dictates that the more we have invested in something, the more reluctant we are to give it up. However, sometimes the best course of action is to cut our losses and move on. By acknowledging the sunken cost fallacy, we can be more mindful of its influence on our decision-making and avoid making choices that are not in our best interests.
The Optimism Bias is the cognitive bias that causes people to believe that they are more likely to experience positive events and less likely to experience negative events. The optimism bias is often seen as a positive thing, as it can help people remain hopeful under challenging situations and persist in the face of setbacks. However, the optimism bias can also lead people to make irrational decisions, as they underestimate the likelihood of negative outcomes.
For example, Dr. Gleb shares about a tech startup founder who was to get coaching from him once his company’s equity reached $10 million. However, during the SWOT analysis that Dr. Gleb conducted, the entrepreneur failed to list delegating tasks effectively as an area of weakness. Though it was clear that this was a point of concern for many investors, he was very defensive when confronted with the issue. It wasn’t until Dr. Gleb showed him how his optimism bias was harming his company that he was able to let go of control and allow other people to do their jobs. Without this guidance, many entrepreneurs make the same mistake, and their businesses suffer as a result.
Overcoming Cognitive Biases
Cognitive bias is a powerful force that can majorly impact your business. This type of bias occurs when our brains make judgments and decisions based on emotions or past experiences rather than logic or reason.
To overcome these biases and make more informed decisions, it’s essential to be aware of them and understand how they work. We’ve outlined three cognitive biases that are particularly harmful to businesses and provided tips for overcoming them. Are you ready to start making better decisions for your company?
We’ve seen a significant uptick in inflationary pressure across the country, with no signs of it abating. Labor increases are driving all costs up, so now is the time to manage your margins diligently — and to determine if you’re increasing your prices enough.
Gross Margin and Labor Efficiency
Gross profit is revenue less any direct material costs, including subcontracted work. For a construction company, for example, direct material costs would be sticks and bricks as well as subcontractors. The remainder is your gross profit.
I’m a subscriber to Greg Crabtree’s Simple Numbers concept, which relies heavily on maximizing labor efficiency. Most small- and medium-sized businesses do not track or monitor this number, but it is a simple concept. Direct Labor Efficiency (as opposed to administrative or marketing labor) is your gross profit divided by your total labor costs (including benefits and taxes). For example, if your gross profit for the period is $3MM and your direct labor costs are $1.5MM, your labor efficiency ratio would be 2.0.
A good target for Direct Labor Efficiency is 2.75, but that will vary by industry. Consider benchmarking your numbers against industry averages to start.
Gross Margin is a related metric that is the percentage of your direct materials and direct labor to revenue. For instance, if your revenue for a period was $4MM and your direct materials plus direct labor is $2.5MM, then your Gross Margin Percentage is 37.5%. Although gross margin is important to monitor, normally, you don’t have as much control over your vendor pricing as you do with maximizing your labor. That is why we recommend focusing on maximizing Labor Efficiency.
How to Maximize Labor Efficiency
There are a number of strategies to maximize labor efficiency. However, my experience leans towards involving your operations/production team in solving the problem and incentivizing them based upon the results. Top-down approaches don’t usually work as well as letting people solve the problem themselves.
Give them a clear understanding of the problem they’re trying to solve. In these instances, I recommend breaking the problem down to an as granular level as possible. For instance, don’t simply identify one location that has better labor efficiency than another and say fix it. Go to the shop floor, find the differences, and solve those problems.
Pricing As a Strategy
More than likely, you have some discretion in increasing your prices immediately. Analyze your customers by gross margin and unload the bottom 10-20% of them. Most of the time, you will find that you have large volume customers that aren’t contributing much margin.
Reciprocally, you have the top 10-20% of your customers that will pay you more. Have conversations with them to determine if there are any revenue opportunities (e.g., items/services that are ancillary but you don’t currently offer). Combining those two actions will have a tremendous impact on your gross profit and bottom line.
Should you need help in executing your financial growth, consider outsourcing a fractional CFO to guide your team through the business growth process. Learn more about fractional leadership here.
About the Author
As CEO of Core Group, a profit-first business and financial services firm, and a Forbes Business Council member, Christian Brim and his team help companies grow their business while saving taxes. To learn more, contact Christian on LinkedIn or visit coregroupus.com.
“I dream things that never were, and I say ‘Why not?'” — George Bernard Shaw
As an entrepreneur, you leapt headlong into your venture without all the answers, confident you’d figure out what you need to know along the way. Wearing many hats and spinning lots of plates, you inspired others to join you, and, together, you grew. Now your business has hit an impasse or plateau. You know what got you here isn’t going to get you where you want to go. But you’ve maxed out your capacity and don’t have the in-house knowledge, skills, experience, or perspective to do what’s necessary to take things to the next level.
If this sounds like you, congratulations! You’ve already built a viable small business. What’s more, you may be just one key hire away from jumpstarting your next phase of breakthrough growth.
Why a Fractional Leader?
With the fractional model, you gain access to a higher level of executive leadership whose talent and experience would otherwise be unavailable to you. Fractional leaders aren’t cheap, but they can be affordable to a small business or cash-strapped startup because they work only part-time for each client and typically don’t require benefits or equity.
In essence, you’re “renting” a fractional executive for a period of time to help your business grow to the next level. Once your fractional executive has accomplished that goal for you, they’re usually happy to help you find, hire, and groom their full-time replacement, if necessary. Then they move on to their next growth challenge — generally what excites them most.
You may be wondering: With so much to do, how can a fractional executive possibly transform my business if they’re not working full time? The short answer is it depends on how you use them. If you’re looking for someone to take mundane tasks off your plate, you’re unlikely to achieve the level of growth you’re seeking.
But if you let them focus primarily on growing the business, an experienced fractional exec can get the job done much faster, more effectively, and with far less risk than a first-timer. One way to think of it: hiring a fractional executive is like plugging your business into a higher voltage battery. While you may not need to use all the battery’s power to run your company just yet, the engine that will drive your business’s growth won’t even start without it.
Why Start With a Fractional COO?
Today, you can hire all kinds of fractional executives — CMOs, CFOs, CHROs, etc. Many founders/CEOs build whole teams of fractional executives to grow their businesses. However, if you’re considering your first fractional hire, and you need help growing your business more or less across the board, you may be best off starting with a fractional chief operating officer (COO).
Why? While the function of a COO varies from business to business, the scope of a true COO’s responsibility is the entire organization, not just a single business function. They must take a holistic view of the business and understand how it all works together as a dynamic system — made up of interconnected functions, processes, inputs and outputs — itself part of an even larger system, for example, the marketplace.
In addition, a fractional COO often has deep hands-on experience in most, if not all, aspects of a business — sales, marketing, product development, finance, technology, HR, customer service. They not only understand the system as a whole but also have at least working knowledge of the different subsystems and how they all relate to each other and the whole.
To use a medical analogy, one of the functions of a good COO is to serve as a sort of trusted primary care physician who can evaluate the health of your entire business, make accurate diagnoses, prescribe the right treatments or cures, and refer you to specialists as necessary.
To carry the analogy further, they must also have an excellent bedside manner, knowing how to communicate effectively with all different types of employees, across all functions and contexts, 360 degrees, as well as customers, vendors, partners, investors, and so on.
Executing for Business Growth
However, the “doctor” analogy stops there. A fractional COO isn’t a mere consultant who spends the metaphorical equivalent of 15 minutes examining your business, writes you a prescription, and then beats a hasty retreat. No, a fractional COO works in your business as well as on your business, moving fluidly from analysis, strategy, and planning to execution; driving progress each week; holding people accountable for results; testing, measuring, learning, and — if they’re doing their job — continuously improving performance and growing your top and bottom lines.
As Oliver Wendell Holmes said, “Many ideas grow better when transplanted into another mind than the one where they sprang up.”
A great fractional COO will take your vision and run with it, in the process making your long-sought business dream a present-day reality. You can learn more about the benefits of fractional leadership here.
About the Author
Mark Scrimenti is a Fractional COO and Fractional Integrator for businesses running on EOS. He has 15-plus years of leadership experience in e-commerce, digital product development, sales, marketing, and customer experience. Connect with Mark on LinkedIn or visit his website at vividpathconsulting.com if you’re ready to jumpstart your own business’s growth.