Financial advisors, as both business leaders as well as experts in the realm of economics can be one of the leaders entrepreneurs can turn to for advice and leadership. And when they do, that kind of relationship building can help ensure that the businesses that develop in their communities scale deep- that is, stay in the community nurturing other businesses and creating healthier economies for all.
Amid the chaos of the pandemic’s affect on businesses was a small, fantastic nugget. The number of new businesses rose, dramatically. By one count, the number of startup companies in the U.S. rose from slightly more than 700,000 in 2019 to slightly more than 800,000, an increase of 12.5%. By other counts, the number of new business applications filed with government agencies reached 5.4 million in 2021, far surpassing 2020’s record of 4.4 million, or an increase of 20%. Worldwide, the increase in start up companies in 2020 increased 26.9% over the last decade. Whether you are one of those companies starting fresh in 2022, or you work with many of them, there are a few clear key points in what can help make an entrepreneur successful. The clearest of them involves scaling deep versus scaling up and owning your knowledge gaps. Here’s more of what we mean.
Many small businesses and entrepreneurs have been told to keep their foot on the accelerator, or risk going backward. But recent studies show that constantly moving forward isn’t always the key to success. One such study looked at two entrepreneurial incubators, ACCEL and GREEN, and found two highly different approaches. The ACCEL model focused on scaling up – that is, they measured success by maximizing returns with minimal cost as a measure of financial growth. This approach effectively acted as the bumpers in a bowling lane – keeping the ball rolling towards ideas that would always scale up. By focusing on scaling up, entrepreneurs often have to jettison parts of their ideas that may boost other businesses in their communities. The bigger aspects of their vision get broken down into smaller, more easy to roll out pieces. The GREEN model focused on “entrepreneurial bricolage — that is, a model where entrepreneurs repurpose and recombine resources that are already available, rather than seeking out funding from external sources.”[1] This model chose to scale deep rather than scaling up. The result was that the businesses built via GREEN stayed within their communities and continued to grow.
What’s interesting about the model of scaling deep is how inherently asking for advice is built into it. By looking to resources already in the community, the folks starting businesses in the scaling deep model had created a network of resources at the ready. That is, not just sources of materials, but sources of business advice. This dovetails with one recurring theme of most of the advice experts give to entrepreneurs around leadership. Folks who have the knowledge to start a business can become subject experts. Says head of Emerge Learning Natalie Macaulay, “they become experts in something and suddenly they find themselves at the helm as leader. One of the first steps they must take to become an engaging leader is to get rid of the notion that they’re supposed to know all the answers. In fact, they need to accept they will never have all of the answers.”[2] Put more bluntly, “there will always be people who are smarter than you. If you’re lucky enough to find these people, hire them. Focus on the things that you’re best at and give them the freedom to do the same.”[3]
Financial advisors, as both business leaders as well as experts in the realm of economics can be one of the leaders entrepreneurs can turn to for advice and leadership. And when they do, that kind of relationship building can help ensure that the businesses that develop in their communities scale deep- that is, stay in the community nurturing other businesses and creating healthier economies for all. So, to help grow your business, help other businesses scale deep by becoming a trusted resource for entrepreneurs and start up businesses. You can get lists of start ups and new businesses from your local Chamber of Commerce, the Secretary of State for your location, or even Google. As always, make sure to consult with counsel and other advisors before engaging in any new marketing.
[1] https://hbr.org/2022/01/research-how-entrepreneurship-can-revitalize-local-communities
[3] https://www.entrepreneur.com/article/237077
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
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