How to Survive Without a Job

Inc.'s guide to creating your own workplace in the '90s

OK. You've made the decision. You're leaving the corporate world to start your own company. No argument here. Sure, it's a gamble. So is staying put. Not even IBM is offering job security these days.

But do us a favor, and take this article with you. For what you'll find -- as experienced entrepreneurs have already found -- is that there's no such thing as a generic small business anymore. Small companies, sure. But these days they come in a startling variety of shapes and sizes and structures, and they're tailored as much to their owners' objectives as to the markets they serve. Before you begin, you'd better know what kind of company you want to build, and where you expect to be in 5 -- maybe even 25 -- years.

Which means you'll have to plot a careful course. To help you along, here's Inc.'s map of the rapidly changing small-business landscape.

This is not Your Father's Oldsmobile Dealership
(and other notes on the transformation of small companies)

Maybe you remember yesterday's small businesses. Corner drugstores and Cadillac-Olds dealers. Family-owned print shops and two-man insurance agencies. They had a lot in common, those companies, and not just the vintage cash registers and black rotary phones. Their customers were local, their objectives limited. Marketing meant playing golf with a prospect. Management meant meeting the payroll on Friday.

And today? Well, as Dorothy said to Toto, we're not in Kansas anymore. Small companies today are as numerous and diverse as the inhabitants of the Land of Oz.

Measured by tax returns, for example, the number of businesses in the United States rose 54% during the 1980s. Yet the population grew only 10%. In 1990 the Internal Revenue Service counted 4.4 million corporations, 1.8 million partnerships, and 14.2 million sole proprietorships. Most of these companies are tiny. Only about 7,000 U.S. companies boast a payroll of more than 500.

Within the small-business universe, moreover, is a startling degree of diversity. Three dimensions of difference:

What they do. As in the past, plenty of small enterprises are service companies and run-of-the-mall retailers. But some are on the cutting edge of any number of fields, and not just in computers. Clamshell Buildings Inc. (18 full-time employees) manufactures and markets hangarlike aluminum-frame structures that can be assembled or disassembled in a few hours. Dozens were used by the military during the Gulf war. Advanced Engineering Associates (7 employees) was last seen exploring energy-development projects in Ulan Bator. (Ulan Bator is the capital of Mongolia.) Here at home, two of the fastest-growing small-business-dominated industries are school-bus manufacturing and medical and dental laboratories. So don't jump to conclusions about what entrepreneurs can and can't do.

Where they're headed. R. Timothy Leister, president of TL Care Inc., in San Francisco, started his infant-products company in 1985. By 1995, give or take a couple of years, he plans to be running a $10-million business. So it is with many new companies: they aim to grow beyond "small" as quickly as possible. Still, for every believer in rapid growth there are plenty of apostates. In Boston Tom Simons quit the 45-employee advertising agency he had helped found and started a new one, this time with a staff of exactly 4 full-time people. Richard Koehler shrank his Houston-based international marketing company, IKR Corp., from 6 employees to 2 -- his wife and himself.

How they operate. Small companies these days can be hotbeds of sophisticated technology. TL Care is plugged into its largest customers (Toys R Us, K Mart) through a computerized data-interchange system. Orders come in (and invoices go out) in the blink of an electronic eye, anytime of day or night. Koehler of IKR uses CD-ROM databases, instead of clerical help, for information gathering. But it isn't just machinery that has proliferated; it's invisible networks of business relationships. Small companies are nodes in networks of subcontractors, of franchisees, of joint ventures and strategic alliances that can span the globe. Elizabeth Locke's 7-employee, Millwood, Va., company, Elizabeth Locke Jewels, is the link between a network of goldsmiths in Bangkok and big U.S. outlets such as Nieman-Marcus. Every tiny Mail Boxes Etc. storefront is allied (1) with other Mail Boxes Etc. franchises; (2) with the San Diego-based franchisor, which has operations in half a dozen countries; and (3) with giant United Parcel Service, which currently owns 12% of the parent.

How to find your own niche in this mix-'n'-match world? Relax: start by typecasting yourself according to the following guide. Maybe you're the cautious sort and will be happy with an old-style business. (If so, there are a few things we want you to know.) Maybe you're ready to plunge into rapid growth. (Ditto.) If you're setting out solo, do you want to stay completely on your own -- or are you willing to trade a little independence for a little equity? The capsule descriptions beginning on page 5 ("One Industry: Four Very Different Companies") show how far-reaching such choices can be.

Type One: The Traditionalists

Who they are. Traditionalists start restaurants, retail stores, landscaping businesses, cleaning ser vices. They buy family-owned manufacturers and distributors, and plan to keep things pretty much the way they've always been. ("Buying a job," it used to be called.) How many are there? The government counts 5.7 million businesses with employees in the United States, up 21% from 1980. Experts such as David Birch of Cognetics Inc. estimate that two-thirds of these companies start small and stay small. Most are run by traditionalists.

What you'd better be good at. A little of everything, of course, just as the how-to-start-a-business books say. Watching the cash. Writing ads. Negotiating with suppliers. But there's one big thing you'll have to do a whole lot better than everything else, and that's hiring and firing. Traditional companies depend on their workers to pump the gas, handle the checkout counters, mow the lawns. Unlike other businesses, they don't have much to offer the help. Wages are low because margins are low. Opportunities for advancement are scarce.