A Caterpillar Doesn't Know It's A Baby Butterfly

Caterpillars go merrily about their business, nibbling leaves and doing caterpillar-type things totally oblivious of the fact that if they survive the vagaries of the modern world then they may well become a glorious butterfly. Similarly, most small and start-up businesses go merrily about their business looking for the next piece of work, oblivious of the fact that if they survive the vagaries of the modern world then they may well become a medium-sized business.

A start-up is not the same as a growing/medium-sized business. Not at all.
While I have just stated the obvious, I want to explain the significance because small and medium-sized businesses have little in common with each other.

Most small businesses never dream of being that much bigger. They assume that everything will stay pretty much the same, plus or minus 10%. As a result, when they finally emerge from their chrysalis to appear in their new form, they are unprepared for the metamorphosis. In the first instance they try to live their life as a medium-sized business using the behaviours and lifestyle of the smaller business. This can spell disaster.

Start of rant: - The “SME” (Small and Medium-sized Enterprise) phrase is hugely misleading. In fact I see red when anyone uses it. A window cleaner is nothing like a freelance architect or a 10-person ad agency or a 20-person precision engineering company. But all are lumped together as an “SME”.

The only people who really use the SME phrase are the larger businesses who find it convenient (even if it is totally irrelevant) to lump together four million businesses in one group and then treat them all as pretty much identical (while selling them a scaled-down/lite version of their products).

One of the fundamentals of grouping together what they call market segments is that they are meant to behave similarly. This is clearly not the case for the market segment called SMEs! Meanwhile the suppliers insist on referring to these four million businesses by the SME phrase, (a government-created statistical phrase that I would never use to describe myself) treating them as one homogenous mass. – End of Rant.

The so-called “medium-sized” business, of more than about 10 employees, is entirely different from the “small” business (up to about 10 employees). The main difference between the two is that the larger starts to have (slightly) more formal management systems, job roles and processes in place. This is not an exact science. It is a bit like deciding when your baby is a child or a teenager an adult. Everything is a bit blurred and varies according to circumstance and behaviour.

The fully fledged medium-sized business/butterfly is different from the small business in so many ways. Every aspect appears to be similar but actually different. The management style, formal systems, business strategy, owners’ role are all different, all developing at different rates. As the business grows, the owner’s ability to do things becomes less relevant as the quality of the people, the strategy, the controls and systems and the owner’s ability to delegate become more important.

What the two have in common is that they are privately-owned. That’s about it. And everyone thinks that they are the same as each other! It’s like when I was young my Dad would shout “Turn that Bob Dylan rubbish down!” and I’d shout back, “Don’t you know anything, it’s not Dylan, it’s The Beatles”. Yes they are similar, but they really are not the same. And the big businesses don’t get it.

The caterpillar and the butterfly work, behave (and buy) differently. Their very reason to exist is different. Their “raison d’être” is different. They simply are not the same.

Networkers, bankers, accountants, phone companies, car salesmen and almost everyone needs to recognise and understand how different these businesses are. While the smaller business tends to be run in a fairly informal and, dare I say, amateur manner, the larger business starts to have an altogether more professional approach to the running of the business.

Smaller businesses tend to be needier – a sweeping generalisation, I know. They tend to be more under-resourced, under-funded and less sophisticated in their financial, marketing and operations functions. While a small business is akin to an early aeroplane taking off (will it or won’t it make it?), the larger business has most of the teething problems sorted (finding customers, making, selling) and has more subtle, more strategic issues to deal with.

While the Government, Business Link, and the whole business support industry squabble over definitions,  market share and how good they are for SMEs (whatever that means), there are some more fundamental issues to be recognised:

Businesses above and below the magic 10-people threshold are entirely different in terms of:

• How they see themselves and their future
• What their key issues are, what they need and want
• How they want to be treated, how you should sell to them; how they buy
• How well managed they are.

As Spring approaches, ask yourself, “Does that caterpillar know that it might one day be a butterfly?” because if it did then it might behave differently as it prepares for the big change.

about the author

 Robert Craven is a keynote speaker, the author of business best-seller Kick-Start Your Business and runs The Directors’ Centre. for further information contact Robert Craven on 01225 851044, rc@directorscentre.com

Robert Craven©2011

publication details

First published in Start Your Business Magazine - June 2010