Small Business Exposed

The Tribes That Drive Economies

Scott Holmes, Michael T. Schaper

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781351818872
• Topic: Business
• Subtopic: Business General
• Index: Business

This book is a look into the world of the small business owner through their eyes – how the five different "tribes" of business perceive the world around them, how they run their businesses, their motivations and goals. It's not another "how to" book or an academic treatise.

Everyone's needs and hopes are different; however, by using cutting-edge social scientific research techniques, we break the business community into five groups (or tribes): The Seekers, Whatnows, Drifters, Satisficers and Digitals. Each tribe has its own set of issues. And there are also some things which cut across all the tribes – the consistent elements in small business owners' DNA. Understanding which tribe you belong to could make the difference in growing your business – or help you better advise businesses to achieve their goals.

Small Business Exposed will bridge the gap between the frontiers of small business research and the popular business book market. As such, it will become an essential text not only for the small businessperson, but also enter the libraries of advisors, accountants, bankers and anyone else with a vested interest in the business economy.

Part I

The nature of the small firm

Chapter 1

Game changer

The people are the masters.

Edmund Burke, House of Commons, 1780

Every day, in every part of the globe, millions of small businesses go to war – sometimes against each other, but often with themselves.

This book opens up the economic and social mystery of the entities that underpin communities. Small firms are “hidden” within clear sight. They are the backbone of our economies, but we know very little about them – their goals and aspirations; what makes them similar; what makes them different. This all starts to change with this book.

To put it simply, we see the economies and business communities of the world differently. Yes, they are made up of millions of businesses. But most of these businesses – actually almost all of them – aren’t really businesses as we traditionally think about them. They are extensions of the individuals and families who own and operate them. And once we realise that businesses are all as unique as each of us as individuals, then we can start to understand what motivates them, as well as the decision processes and strategies they adopt.

Have you ever met anyone who is exactly just like you? We doubt it, but it’s possible. Do you ever find yourself sharing common behaviours, world views, problems and opportunities as some other individuals? Of course, although you may not always identify with them at first glance. But once you start thinking about it, you’ll realise you belong in one or another group that shares some (but not all) common features.

Just as within different cultures and societies there are groups of individuals, so too there are different business groups. Knowing this will help business owners appreciate where they are and perhaps which group they want to belong to. Even more importantly, understanding the tribes can help everyone involved with small firms to better understand the business community. Then supporters can respond to the characteristic traits of each business; policy can be more effectively targeted and meaningfully applied; and advice and support can be adjusted to the individual needs of each business. One size no longer fits all.

From the time humanity moved to communal living – camps, villages, fortresses, towns and cities – people have sought to specialise their labour, activities and efforts; to create value for other members of the community and to personally benefit in return. Initially, this was based on the specialisation of their labour – hunting, gathering, building shelter, making tools and clothing. As communities grew and technologies, resources and knowledge advanced, groups of people clustered into certain trades or services.

For thousands of years these people went about the business of supporting their communities and making a living. As economies and societies evolved and changed, the ways and means of adding value also changed. But one thing has not changed: the businesses that people operate are basically extensions of the people who own them.

Despite the fact that small businesses are predominant in all economies, we know very little about them. Small businesses are often portrayed as a generic group, and based on numbers alone. In the European Union, for example, it’s any business with up to 250 employees. Canadians regard a firm with fewer than 100 staff as small, while in Australia and New Zealand, they’re generally limited to businesses with fewer than 20 employees. These definitions vary by country (a number of international definitions are detailed in Chapter 2); however, regardless of country the broad-brush, one-size-fits-all approach is adopted. Every little firm is treated as a “small business”, and it’s assumed it thinks and operates in the same way as every other small-scale business venture. Nothing could be further from the truth, and continuing to use this approach isn’t helping anyone. In fact, the way we all talk about small firms as a generic category – despite their diversity – is a major reason why we continue to have a limited understanding of them.

This book changes the homogeneous view that reduces small firms to the absurdity that they are interchangeable blanks. They are as varied as our personalities. They are the adaptive and innovative change makers in the economy. Unlike large firms, small firms quickly adapt, respond, mould and reshape to opportunities. And unlike large firms, they have no choice: their portfolio of investment options is normally not spread to cater for risk. A truck, shed, shop or piece of equipment is often a small firm’s only investment. They are highly exposed to any shift in market demand, so they need to be nimble to survive.

These businesses group into five distinctly different tribes. These tribes compete relentlessly, both within and between each other. The resources available to the businesses that make up each group are finite, so the strong prosper, while the weak often limp along until they are eventually killed off or die.

If you’re a small firm owner, knowing which tribe you fall into (or could end up in) is just the first step to building, improving, growing and perhaps even killing your business. If you know your tribe you understand your competitors and how to fight them; and you know how to shift tribes and what is at stake in doing so.

Understanding the different tribes

So, what are the clans that make up the small enterprise nation?

They certainly are a diverse mix. A business currently in one tribe could easily have a foot across the boundary of another. Each business is a unique extension of its owners, so tribe members, like the population of a nation, will display unique characteristics even in their own clan. There is no perfect fit.

The Five Tribes are as follows:

• Seekers are over one in ten businesses in the economy. They strive for growth but fewer than half achieve it. They tend to be newer businesses, with annual revenues of $500,000 or less and two to four employees, with a concentration around retail trade. They are seeking to build a business, with the main issues impacting on these objectives being maintaining and growing revenues; managing cashflows, costs and overheads; and access to finance.
• Whatnows are about one in four businesses. These businesses tend to be older than the Seekers group: almost half are ten years or older. However, like the Seekers, Whatnows want to grow the business, but the majority are not achieving growth objectives. They have a similar turnover to the Seekers, with most having revenues of $500,000 or less and two to four employees. In terms of industry profile they are slightly skewed towards finance and insurance, health care and social assistance. The major factors they perceive as impacting on growth objectives are economic uncertainty and competition.
• Drifters represent almost 20 per cent of the sector. They tend to be an established group with most businesses in operation for five or more years. But, like the Seekers and Whatnows, they have an average turnover of $500,000 or less and two to four employees. Unlike the Whatnows and Seekers a significant proportion of business owners are seeking to stabilise operations and contain growth. The focus is on keeping the business going as a source of household income and wealth. This group struggles to achieve this core objective. While the businesses are viable in some sense, they are drifting along. This group is slightly skewed towards agriculture, construction, education and training. The main factors identified as impacting on their businesses include: red tape; taxation; and managing cashflows, costs and overheads.
• Satisficers is a significant group representing a quarter of all firms. The majority are well established, with almost half ten years or older. They still fit the broader sector profile of revenues of $500,000 per annum or less and two to four employees. The majority of these owners are aiming to have stability of performance and many more achieve this than the Drifters. These are businesses that are comfortable in their skin. They have dealt with the typical range of issues owners confront along the way and, as a result, have either resolved these issues or accept them as a fact of life.
• Digitals are an emerging group in the modern economy and represent one in five businesses. They seek to leverage the digital platforms and opportunities created by the age of the Internet. Like the Seekers, they are aiming to grow; unlike the Seekers they are often achieving growth objectives. As such, they tend to be larger, with revenues exceeding $500,000 per annum and a significant group with turnovers of $1 million or more. They also have on average more employees: around six to ten people (including the owners). They have a greater number of factors considered to be challenges for achieving business objectives, including: technology changes; competition; research and development; and access to timely information.

The tribes developed in this book are drawn from a large-scale study of the Australian economy, but we suggest similar tribal patterns will exist in all economies.

A different perspective

This book has two parts:

• Part I – The nature of the small firm starts by providing an overview of the prevalence and value of small firms to economies around the world; continues with a focus on the motivations for business ownership; and discusses the lifecycles of small firms. We then introduce Holmes and Gupta’s (2015) findings and the case-study approach we adopt to understand tribes in the economy.
• In Part II – The five tribes we consider each tribe in detail alongside a discussion of the research relevant to the issues they confront. We take insights from the “quintessential” case studies undertaken for each tribe.

This book builds on the founding work of Holmes and Gupta (2015), who took the factor map model developed by Holmes (and explained in Chapter 4) to build a behavioural approach to understanding small firms. This resulted in the Five Tribes model that underpins this book. Here, we extend that taxonomy through a case-based approach to deepen the understanding of the issues identified within each tribe and how it impacts on their capacity to achieve business goals and aspirations. We combine this case-based approach with a detailed analysis of what the existing research tells us about each of the impact factors.

Different as they are, the case-study interviews showed us that all of the tribes have a few things in common. This sheds a new light on the small business sector that we discuss in Chapter 10.

We conclude with our view on what all this means for the businesses that drive our economies.

So let’s go tribal

This book provides a detailed outline of the characteristics of each tribe and helps you to understand the groups that make up the economy. You can also go online and take the quiz. It will tell you which tribe your business (and, more importantly, you) fall into or aspire to. Each tribal chapter also incorporates actual examples of businesses and owners, putting you inside the tribe.

If you’re curious now go to http://FiveTribes.dbmweb.com.au. You can come back and go straight to the chapter focused on your tribe.

This book also provides insight into the structure and nature of the sm...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Figures
• Tables
• Preface
• Part I The nature of the small firm
• Part II The five tribes
• Appendix 1
• Appendix 2
• Glossary
• Index