Industry Canada applies the term SME (Small to Medium Enterprise) to businesses with fewer than 500 employees. Firms with 500 or more employees are referred to as “large businesses”.
Of course, 1 to 499 employees covers a lot of ground so Industry Canada further defines a small business as one with fewer than 100 employees if it produces goods or fewer than 50 employees if it’s a service based business.
What’s a Small Business?
To define small business even further, we can roughly apply the Industry Canada revenue per employee figure (manufacturing sector) of $400,000. So a typical manufacturer with 50 employees will have revenues of about $20mm and one with 300 employees may have revenues of about $120mm.
Small Business is Big Business
Another interesting statistic courtesy of Industry Canada is that broken down by number of employees, small businesses make up 98.2 percent of the market, with medium-sized businesses at 1.6 percent of employer businesses and large businesses at 0.1 percent.
Small businesses are obviously very different from big businesses but they can often also be quite different from medium sized businesses. And one of the big differences between small businesses and their much larger cousins is how they’re managed, both in substance and in style. Any financial executive contemplating a transition from a large organization to a much smaller business needs to be aware that the differences between these two worlds is much more than just scale.
It May Take Some Getting Used To
While many big company financial executives successfully make the transition to small business CFO, many find that they struggle in their new environments.
What differentiates the CFOs who thrive at small businesses from those who struggle? Based on my conversations with CEOs who’ve hired CFOs out of large companies and CFOs who made the transition from large to small, here’s what stands out:
No Job Too Big, No Job Too Small
They cheerfully do what needs doing. Small company executives don’t have the luxury of staffing out the many myriad problems and challenges that arise on a regular basis. CFOs may be making a presentation to their bankers one day and fixing the copier the next. In most small businesses, the successful CFO’s philosophy will be “No job is too big, no job is too small.”
Ego = No go
Ego is a four letter word. Part and parcel of the “can-do” attitude is the absence of the “corner suite syndrome” some executives fall prey to. The successful CFO recognizes that everyone in the organization has an integral role to play in the company’s success. They treat the people working on the loading dock with the same respect as they do the people in the boardroom.
Arms around the Enterprise
They’ve got the big picture. In many small businesses the CFO is the right hand person to the CEO and will be very involved in operational initiatives as well as strategic planning. Although their area of expertise may be finance, they also need to be very well versed in sales, marketing, operations and distribution.
Can Play Any Position
They’re a utility player. Small businesses often have to roll non-financial functions under the CFO. Besides overseeing the finance and accounting function, CFOs in small businesses often also have responsibility for human resources, IT and general administration. And of course, any special projects that arise such as a facilities move will also fall under their purview.
Get Out of Your Office
They’re highly visible within the organization. Successful small business CFOs spend as little time as possible in their office. They want to get to know what’s really going on in the business so they’re on the shop floor, they get to know the sales people and they’re talking to customers and suppliers. By being highly visible and accessible they have conversations that give them insights into the business that they wouldn’t get from the financials alone.
Adapt and Adopt
A big company CFO’s job description and a small company’s CFO’s job description may read the same but the positions are totally different. Financial executives who are successful in making the move to small business don’t rely on the tool and techniques that made them successful before. They’re willing to adapt their old skills and adopt the new tools required to make them successful in their new home.