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Where do you work? The term you choose to describe this place—consultancy, studio, shop, agency, freelancer—is in some ways a roll of the dice. It’s an aesthetic decision as much as anything else. But it can also say a lot about the culture of the business. For instance, where are your offerings on the spectrum of fields like advertising, design, software development, and user experience? I’ve listened to people emote emphatically about what is a shop and what is an agency, assigning pride to one and derision to another.

Another thing those terms imply, to some degree, is scale. No one’s going to advertise their 50-person freelancer, for instance. Likewise the proclamation of a 2-person agency will no doubt elicit a few snickers from the crowd.

But feelings aside, is there a real correlation between some of the qualities we use to measure a workplace (capabilities, cultural traits, limitations) and its size? When we’re trying to figure out where to work, or how we want to develop our own business, might we be able to make some value judgements based on scale?

To help make this a little clearer, I talked to some friends who have been in a variety of situations. Some of them started small and grew their businesses. Others went the other direction. Let’s see if we can figure out why.

Go big or go home

I myself am the founder of a place that has grown over the years, albeit very gradually and in small increments. We started Bearded in 2008 with two people, and are now at seven after as many years. Now by most standards we’re still pretty small, but the differences between 2 to 3 and 6 to 7 people can be quite striking.

As a two-person business, anything that had to be done was done by one of us. Thus we wore a lot of hats. My major roles were that of designer, salesman, and project manager. My business partner’s were mostly that of web developer and operations. And then there were the myriad less-glamorous tasks we’d split up, like mopping the floor or harassing the landlord to get the electricity turned back on after the breaker in the locked basement blew for the third time that week (true story).

At that point, we had only a dim awareness of many of the skills and processes that I now see as integral to successful web design. As we hired new people, we found we weren’t just adding staff that duplicated our existing skill sets, but bringing on folks whose expertise complemented our own. These new folks helped us create better products for our customers.

Our new hires brought in skills like illustration, custom application development, animation, content strategy, information architecture, user experience design, and business development. Though you might expect this would broaden our offerings, it actually did the opposite. We added people and skills, but somehow our focus grew narrower. Those added skills allowed us the expertise to solve more complex problems in more specific areas. We stopped being a general design shop, refusing projects like logo and stationary designs. Over time we matured into a web consultancy focused on user experience in a multi-device world, through the lens of progressive front-end development.

Ben Callahan had a similar experience with Sparkbox:

The biggest benefit to having a larger team is that we can allow people to specialize a bit more. For example, as a front-end dev that’s transitioned to the role of president, I can focus on leading our company instead of writing code. When we were smaller, everyone did everything. This focus lets us go deeper in specific areas.

For Bearded, that small amount of growth deepened our expertise and allowed us to shed what were, to me, the least interesting things we did. It allowed us to focus on what we’re best at—what sets us apart from others. In the process, that also made Bearded a more satisfying place to work.

What you can do with more

Quality of life and job satisfaction are important. But practically speaking, what are the advantages that you only find at scale?

Val Head’s previous experience in agency life felt full of knowledge and resources:

There were so many people with different strengths, background and knowledge. If there was something you needed to know you could pretty much find someone a few cubes over or on another floor who knew all about it.

Jeff Robbins, co-founder and CEO of Lullabot, tends to agree:

Being bigger has given us resources to accomplish more. We’ve been able to experiment with products and even improve our website in ways that were more difficult when we were a smaller company.

So in Jeff’s experience, Lullabot can do more with more people. But does more people mean that you can do bigger projects? Val Head puts it this way:

Larger businesses are better at handling a whole suite of related projects. Basically anything where having more people could make things go faster or more efficiently.

Todd Parker and Patty Toland spent some time at a very large agency before founding Filament Group, and they found that scale also really affected business development:

The upside of that large scale was that they hired really smart people and did insightful work for good companies who wanted to solve hard problems well, and with that scale they were able to secure contracts with bigger clients and get into rooms alongside serious Big Consulting firms, and compete.

Which is all great. But there’s a big (pardon the pun) aspect to scale that we haven’t broached directly yet, and that’s money.

It’s all about the Benjamins

Regardless of how you price your work, if you’re running a healthy business, most employees should do enough billable work to cover their own cost, plus generate a profit for the business.

Now as the business grows, there will likely be a need for some support staff—people who help the business run but whose work isn’t directly billable. Some examples are operations, sales, and administrative staff. Like office space or utilities, these positions tend to support some number of billable staff. This means that the more billable staff you can employ (hire and have work for) without increasing your support staff and other overhead, the more profit the business will be able to generate.

Though profitability tends to come in overhead-related tiers, the general rule is: the more billable staff you can employ, the more money your business can bring in. The real trick here being that those staff need to be doing billable work all the time. Which introduces a chicken and egg situation: if you hire staff and don’t have the work to justify them, you’re losing money. If you have to turn down the work you want to do because you don’t have the people to do it… that’s no fun either. And possibly worst of all is the option of taking on more work than you can reasonably handle, which will certainly get you into trouble sooner or later.

I’ve found that growth tends to be a balance between business development and hiring. When we’re in growth mode at Bearded, we tend to try to ride at the edge of the maximum amount of work we can do while actively looking for new hires. For instance, if our ideal workload is 3 full time projects, then we’ll shoot for 3 1/2 projects worth of work for a little while. That tends to be a nice stress test, giving us a good sense of which skill sets are overworked at that scale. When the right person comes along, we hire them. We might be a little suboptimal for a while in terms of workload and stress, but eventually we’ll add appropriate staff and settle in to our new ideal workload (maybe 3½ or 4 full time projects), and start the same cycle again when we’re ready.

Todd Parker and Patty Toland at Filament Group look at it this way:

Even though our growth has been minuscule and snail-paced, we have always and only grown when we’ve found a potential team member who is so incredible we just have to work with them. Jim Collins was right in Good to Great when he said having the right people on the bus is the most essential decision and everything else follows (or doesn’t). Our growth decisions are always built around people.

Sounds a lot like my experience. If you find just the right person to hire, it’s usually worth taking the hit on overhead until you can drum up more business. Good people are hard to find, and finding good people is one of the key ingredients to doing better work (and making more money).

Growing pains

So growing can be good. But growing a business is not without challenges.

Lullabot’s Jeff Robbins has some interesting thoughts on the pains of scaling:

I’ve got a theory that company growth inflection points happen at the powers of 2. Going from 1 person to 2 is a challenge. At the point where you have 4 people, the company is getting serious. When you’ve got 8 people, you begin to feel the responsibility. At 16 people, you’re legitimate—and there’s no going back. The 16 to 32 person stretch is also where you need to start thinking about management structures. At 32 people, you start to think about the needs of the company rather than just the individual people. Your trees have become a forest. You start thinking about things like “systems” and “process.” We’re on our way to 64 people. This is where people start losing track of each other. They don’t feel like they “know” everyone at the company and they don’t speak up and contribute as often because they assume that they can’t make an impact at a company of this size.

From Jeff’s experience, there are always challenges and opportunities at any size. Each situation must be solved for to progress to the next. Growth, in other words, isn’t all tripping through the daisies.

More people, more problems

Ben Callahan notes that “the weight of a larger payroll is something that makes a larger size more stressful.”

And it’s not just the weight of the larger payroll, but also of the increased infrastructure. Todd Parker and Patty Toland explain:

Working within a larger organization always felt fraught with pipeline discussions: having a bench of idle people was stressful, and managing schedules when deadlines inevitably moved out was equally hard. Even with some incredible project managers, it was a balancing act that frequently required compromising (quality of work, ethics of clients, respect for employees’ personal lives and schedules) that wasn’t always comfortable.

Todd and Patty make a great point about the compromises that inevitably come about when you have a big payroll. I once spoke with a former partner of an agency that had ~$1M monthly overhead. At some point she had to choose between taking work from an apparel company in the midst of a sweatshop scandal, or laying off staff. She chose to work with the apparel company and keep her staff employed, but it wasn’t long before she exited the company because of this kind of ethical conflict.

Sparkbox’s Ben Callahan adds that larger organizations’ agility can sometimes suffer in other ways, as well:

Smaller teams also require a little less process—having everyone in the same room can unintentionally assist in your organization’s communication. And, there’s something freeing about being small—[at Sparkbox] we try to retain all the benefits of being small, but it’s never quite the same.

So it sounds like that increased infrastructure—that same thing that gets you all those extra resources that people like—can potentially become a liability. Coordinating all those people is difficult, and takes a significant amount of time away from other tasks.

Regardless, Jeff Robbins has found that at Lullabot they’ve always been able to overcome the challenges that arise:

I see growth as a creative endeavor. It’s problem solving. We used to say things like “if we grow any larger than this, the company isn’t going to be as good.” But we kept asking ourselves “why do we believe this?” And eventually we’d come up with creative solutions which would allow us to grow without losing the things we loved about the company. The growth brought with it more creative possibilities and capabilities.

For Jeff, growth’s problems can be overcome. But some others don’t see much in the way of benefit for larger organizations. Brad Frost doesn’t agree that larger teams are better at bigger work:

I can’t even say that a larger scale of work can only be accomplished by a larger team, as I’ve seen time and time again that small teams can do amazingly complex work given the time and autonomy to do so.

And I’ll be damned if that isn’t a nice segue into the benefits of smaller teams!

Let’s get small

Not everyone wants to work at a large business. In fact, lots of folks seem to depart from large businesses with the goal of working somewhere smaller, or even on their own. Someone who’s left the larger agency world to go out on his own is G. Jason Head:

In a larger agency setting there are a lot of titles and seniority levels that need to be addressed. Sometimes, it’s completely valid, but a lot of times it’s also stroking people’s egos. It’s just sort of the reality of agency life.

I like not having half of my day being eaten up by meetings. I like being able to really focus myself on my development work. My concentration is so much better [since going solo], and I honestly think I am doing some of my best work.

Brad Frost has of late done some rather high profile work as part of small ad-hoc teams, and he thinks the benefits are overwhelming:

I absolutely love the momentum that comes with working with a small group of smart, autonomous people. You’re able to collaborate easier, solve problems faster, and get things done without the layers of bullshit that inevitably come from gargantuan teams.

You can go your own way

If you get small enough, you become the owner by default. And it seems like there’s a certain amount of overlap between those who want to work smaller and those who want to be in charge of their own destiny. Todd Parker and Patty Toland of Filament Group have something to say about this:

I think the biggest advantage of being small is the ability to say “Yes” and, more importantly, “No” to the opportunities that pass our desk, and having more control over scope, schedules and terms of working relationships we commit to. With our small team, we can only take on a certain number of projects at a time, so we try to be careful to make sure they’re going to be the best use of our time, that we are the best fit with the most appropriate skills to deliver value for our clients, and that we take on the most interesting opportunities to learn, build our skill sets and promote ideas we think are important.

Weighing those sorts of decisions, choosing whether or not to compromise, is something you don’t generally get to do when you’re not holding the reins. I remember someone talking to me about this issue a number of years ago when we were even smaller, and my response then was that because Bearded was small and had a low overhead, it was easier to turn down problematic-looking work.

That is in some ways true, but I don’t think it’s just the amount of your overhead that ties you down. Similar to the difference between revenue and profit margin is the cost of your overhead as compared to your overall potential project revenue. If you have a $1M monthly overhead, but you have, on average, $2M worth of plausible work that wants to sign every month, then you’re in a pretty safe position as far as picking your projects goes. But if you grow to meet your average potential work, then you don’t get to be so choosy. You have to take every project that shows up at your door, like it or not.

What shall we do?

So what’s better, big or small? Owner or employee? Only you can answer that question. In reality, there are as many variations for a business as there are people to start them.

The question to ask yourself is: what do you most want to get out of your work? If you like having access to a variety of skills and extensive resources, then you might need to get bigger.  If agility or a lack of bureaucracy is what you’re after, then perhaps smaller teams are a better fit. If you’re at a point where you’re looking to make more money, then it may be time to grow bigger. But if being choosy about clients and projects sounds compelling, maybe a smaller crew with less overhead is what you need.

Now it’s likely that most people care about all of those things to some degree. But what’s most important to you? It’s almost assured that you spend as much time working as you do anything else. And no one can ever pay you enough to hate that time—your time on earth. So make sure that, whatever your choices, they help create an environment that makes those days more satisfying.

Source: A List Apart: The Full Feed