Trader Joe’s — the hipster food retailer popular on both coasts of the United States — is, according to Fortune magazine, at a troubled crossroads: If it continues to grow, it may lose what makes it special.
Whether you prioritize bigger over better has a lot to do with your ultimate goal for your business.
If you see yourself selling your business to a financial buyer, such as a private equity group, it will likely evaluate your company first based on its financial performance, so prioritizing top- and bottom-line growth over everything else makes sense.
However, if you want to sell your company to a strategic buyer, defined as someone adjacent to your business with a smart reason to buy your company, that buyer will likely want something unique to plug into its distribution. In other words, it will prioritize how good your company is over how big it is.
Good instead of big is catching on. Jason Fried, the co-founder of 37signals and co-author of Rework, explains that “(Rework) is our fresh take on business. How to start one, build one and grow — or not grow — one. It's about getting back to the basics, making things easier, not harder, and focusing on what really matters.”
Notice the reference to intentionally deciding not to grow?
Google recently bought online gaming company SocialDeck not because it was big but because it had something unique in the online gaming world that would help Google compete with Facebook.
In his book Small Giants, my friend Bo Burlingham (full disclosure: Mr. Burlingham wrote the foreword for my own book, Built to Sell) tells the story of Anchor Brewing, which makes Anchor Steam, and Clif, which makes Clif bars and shots. Both have opted to be great instead of big.
In the case of my research company, we could have grown the top line much more quickly by accepting generic research projects, but we decided instead to offer a single subscription with a focus on one segment of the business market. I think if we had diluted the purity of our revenue by accepting other work, we would have become much less attractive to strategic buyers that would not have known what to do with a hodgepodge of revenue sources.
We focused on one thing, which strategic buyers could fold neatly into existing operations.
Back to Trader Joe’s.
Joe Coulombe, who started the company, sold out to the late Theo Albrecht of the German retailing family empire in 1979. At the time, Trader Joe’s was still a smallish, offbeat retailer with loads of street cred among the Volvo-driving Berkeley set.
Maybe Joe had it right. Maybe that’s when founders should start thinking about their exit — when they sense that they have made their company as good, not necessarily as big, as it can be.
Special to The Globe and Mail
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a valuable – sellable – company. Follow him on Twitter @JohnWarrillow.