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Size Counts

Does your company have to be big to thrive?

Well, sure, but what's the ideal size for your business? Opinions from the trenches ...

How big does a company have to be to survive and prosper? At first blush, it's hard to tell. On the one hand, entrepreneurship and small business have become accepted, even celebrated, in a way that was unimaginable 20 years ago. The CEOs of Fortune 500 companies like to boast about how nimble and adaptable their businesses are -- just like small companies. On the other hand, there's no shortage of big companies, and thanks to the increasing number of mergers and acquisitions, many of those businesses are getting even bigger.

So we asked a variety of people, "How much does size really matter, anyway?" Their answers are all over the map, yet each one rings true. In the end, it seems, it all depends on your location, your business, your industry, and what you want for yourself.

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Jerry Brown, 63
Mayor, Oakland, Calif.
Status: Governor of California from 1974 to 1982; now mayor of the state's eighth largest city, population 400,000

"I can tell you, the difference between state government and city government is profound. For a mayor, it's one city. There are a certain number of schools. There are problems with the streets, with the parks. There are fires. There's development or lack thereof. It's an actual, physical location where the mayor functions as a leader.

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The difference between state and city governments is profound. ... There may be some analogy with companies.

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"There is really no physical location for a governor, not in a state like California. What matters is not what's outside the window of the state capitol but rather the generic impact of rules. Money flows are determined by state government. So it really is a more abstract functioning and framing of rules and decision making.

"So there may be some analogy with companies with many divisions. The more distant from the customer the CEOs or the top management people are, the more they manage the data flow as opposed to experiencing the human encounter of serving a customer -- and the more abstractions, graphs, charts, protocols, accounting conventions, computer printouts, algorithms, and what have you provide the environment for decisions. And even then it's not clear they're decisions, because the decisions are made by the data.

"I enjoy being mayor very much because of the concrete quality of it and because of the engagement with other human beings whose faces I can actually see. As governor, of course, I saw the faces of legislators, I saw the faces of lobbyists, I saw the faces of TV journalists. But the decisions were at a level of abstraction that applied to 25 million people. It's very different thinking when you focus on what you can do with a particular corner with dope dealers on it or a block that ought to have an office building on it or a couple hundred yards of land along the open estuary or the path around Lake Merritt that needs fixing up."

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Louise Epstein, 43
Founder and president, Charge-Off Clearinghouse, Austin
Revenues: $3 million to $5 million
Status: Midsize buyer and reseller of bad debt in an industry in which some of the largest corporations have stumbled

"Size affords us the flexibility to move with the market. The large companies that have failed in this industry have locked themselves into forward contracts to purchase debt at high prices that their subsequent revenues could not support. People just got greedy with OPM -- other people's money.

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Size affords us the flexibility to move with the market.

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"We buy in smaller quantities, ranging from $1 million to $150 million. That makes us relatively small players in our market. We search for portfolios from small banks that are routinely overlooked by the big players. Our objective is to pay cash for the right portfolio and then offer it for sale on a retail, regional basis.

"To my knowledge we are the only company in the country whose primary business is to act as a principal in buying the charged-off accounts outright and to sell and service the sale afterward. Our margins are lean, but the volume is there. Our technology lets us do that. I don't think that a bigger company with more overhead could make any money doing this."

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Gene Gage, 56
Founder and president, Papa Geno's Herb Farm, outside Lincoln, Nebr.
Revenues: $500,000
Status: Small mail-order nursery that grew fast on the strength of a strategic alliance with now-failed Internet retailer Garden.com

"We had our own little business near Lincoln, Nebr., a mail-order business. We were cooking along just fine. We were selling live plants over a Web site and by direct E-mail five years ago, which was pretty unusual. Garden.com, which was getting started then, became aware of our business and approached us. We thought that they had the capabilities that we didn't of marketing nationally. And we were certainly right. They increased our business 1,000% in three years.

"But that also exposed us to some risks we didn't have before. We have more debt than we're comfortable with right now. When Garden.com went out of business, we were actively planting, setting aside space, and hiring people to ship $1.1 million worth of plants this year. Now we'll probably be lucky to ship half of that.