For Businesses, Small Is the New Big

By Jay Walljasper, Ode. Posted July 24, 2007.

In April 17, 2000, Gary Erickson was about to fulfill the wildest hopes of any business entrepreneur. That morning he drove to the Berkeley office of Clif Bar, a company he'd founded eight years earlier, and got ready to sign papers selling it to food giant Quaker Oats for $120 million. Erickson would take home half that: a cool $60 million.

It was a remarkable rags-to-riches story for a guy who at age 33 was living in his parents' garage and making less than $10,000 a year when he envisioned a more wholesome energy snack. An avid outdoors enthusiast, he hit upon the idea on the last stretch of a one-day, 175-mile bike ride as he realized he couldn't stomach another bite of energy bars that tasted like cardboard. His initial investment was $1,000, and R&D was done in his mom's kitchen. He named the product for his dad. But rather than feeling on top of the world about this dream deal, Erickson was uneasy. "I stood in the office waiting to go out and sign the contract," he recounts in his book Raising the Bar. "Out of nowhere, I started to shake and couldn't breathe." He told his business partner that he needed to get some air. Outside in the parking lot, he broke down in tears. And then it hit him as he began to walk around the block: "I don't have to do this.

"I began to laugh, feeling free," he writes. "I turned around, went back to the office and told my partner, 'Send them home. I can't sell the company.'"

What possessed Gary Erickson to turn his back on millions of dollars and throw away a golden opportunity for his company to get big? He was bucking all the business trends. Many of the outspoken champions of socially responsible business, such as Ben & Jerry's, The Body Shop, Stonyfield Farms, Green and Black's chocolate, Tom's of Maine and Aveda eventually sold to corporate conglomerates. And even the brash young Internet companies, which trumpet their independence as a badge of hipness, are conceived with the intention of being gobbled up soon by Google or another huge firm.

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Erickson stubbornly clung to the idea of guiding Clif Bar according to his own vision, not the business-as-usual paradigm of rapid expansion fueled by massive outside investment.

"If we had sold to Quaker Oats, we would just be another bar on the shelf," Erickson explains, sitting at a small desk in his surprisingly modest office that looks out on the sidewalk where he made the fateful decision. "We would not have an environmental program; we would not have given $1.2 million last year to charity in money and products. We would not have gone organic. No one working here would even be here now."

Saying no to conventional-style growth has made Clif Bar a stronger brand, showing that small is not only beautiful but successful. The company now features numerous new energy snacks and has grown 20 percent in each of the last two years. But that is not what Erickson likes to brag about. He shows more excitement talking about Clif Bar's shift to mostly organic ingredients; the Lunafest women's film festival they sponsor in 120 U.S. cities; company vehicles that run on biofuels; the cutting-edge sustainable architecture at the headquarters they are set to build; public-education efforts to address global warming; ample opportunities for staff to volunteer at favourite charities on company time and a work environment that includes a lavish on-site gym, personal trainers, massages and-since the Clif Bar wrapper features a mountaineer-a climbing wall. Mo Siegel, founder of Celestial Seasonings, who sold his tea company to Kraft at a huge profit, once heard Erickson telling the story of Clif Bar's aborted sale and asked, "Can we switch places?"

Clif Bar is not the only thriving company choosing to grow its own way rather than follow the "get big or get out" ideology of global business that has led to Wal-Mart accounting for almost 10 percent of U.S. retail sales and some corporations accumulating economic output higher than that of some nations. Even if you don't read about them in the business press, most companies today measure success in some way other than ever-increasing sales and profits. They don't reject growth per se, but simply decide that the usual tools to achieve it-bringing in big-time investors, selling publicly traded shares or franchising the business-don't fit with their missions and values.

Even in the booming, turbo-charged Internet sector, there are companies that refuse to play by the usual rules. Facebook, a hot social-networking site launched in 2004 by a Harvard sophomore and now based in Silicon Valley, has reputedly turned down a $750 million offer from Viacom and a billion from Yahoo. "I am here to build something for the long term," founder Mark Zuckerberg has declared. "Anything else is a distraction."

Some companies have been doing business this way for centuries. Bob de Kuyper, chairman of the internationally known distillery that bears his name, meets regularly with private equity firms that are interested in buying him out. "Such discussions are always useful in terms of contacts," De Kuyper says. But he knows the outcome in advance. The gin distiller and liqueur producer located in the Dutch city of Schiedam has been in the same family since 1695. "And our strategy aims to keep it that way," he adds. His family business produces some 80 different alcoholic beverages that are exported all over the world. With around 100 employees, the company reports annual turnover of 60 million euros ($80 million ) "and a substantial return we're proud of." De Kuyper questions the alleged advantages of getting big through acquisitions or capital injections from outside investors. "Growth is nice and important, but constant fast growth is nonsense," he says, pointing out that benefits of scale can also be achieved without mergers and acquisitions-such as the joint venture De Kuyper entered into with other drink producers to invest jointly in a bottling plant.

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Jay Walljasper is the executive editor of Ode Magazine.

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