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Why stay small?


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Matt at 37 Signals profiles legendary Brooklyn pizzeria Di Fara. Here’s an excerpt:

[Owner Domenico] DeMarco doesn’t care about experts, franchising, or expansion because he doesn’t have to. That’s what you can do when you run your own small business. You can stay small. You can create your own thing and keep it the way you want it. You can take pride in what you’re creating and oversee everything that comes out of your oven. If people don’t like the wait, they can go somewhere else. If they don’t want to pay extra for the ingredients you grow yourself or import from Italy, that’s fine. You can be a perfectionist and take as long as you want. And the customers that care about what you care about will flock to you.

Plenty of people want to create scalable enterprises and maximize their profit, but many small business owners just want to work for themselves doing something they care about. Steve King at SmallBizLabs took a look at this last week as well. King sketched out three broad (and not exclusive) reasons for starting a business: financial return, passion, and lifestyle flexibility.

This reminded me of one surprising note from Scott Shane's book, The Illusions of Entrepreneurship, which is generally discouraging for entrepreneurs. Shane found that small business owners, despite making less on average than they would as salaried employees and facing high risk of failure, are happier than their W-2 counterparts. In fact, business owners would have to earn about 2.5 times as much on average to be as satisfied working for someone else, Shane says. (Our interview with Shane is here.)

We tend to use sales, profit, and growth to measure business success, which ignores the "soft" factors like satisfaction. By those measures, DeMarco's pizzeria is probably unremarkable.

When you're building a business, are you looking to maximize profit or maximize happiness? They're not mutually exclusive, of course, but they're also not the same.

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