The often-repeated cliché is true: small business really is the backbone of the US economy. It can be also very rewarding to be the owner of one. Plus, 2016 promises to be a great year for those starting a new business. Since so many people are taking the path to becoming small business owners, the internet is flooded with advice on how they can handle everything from marketing and growth to employee retention.
While there is certainly no single formula for small business success, an interesting parallel can be drawn with so-called unicorns, i.e., startup companies that are valued at $1 billion or more. Airbnb, Uber, Snapchat, Pinterest, and Dropbox are all examples of unicorn startups, and they can all be used to draw inspiration for small businesses. After all, they were all small businesses once too. So let’s see the top 5 things you can learn from these companies.
5 Valuable Business Lessons from Unicorn Startups
1. Innovation Can Start Small
Small businesses are often the driver for innovation: usually far more so than big clumsy corporations with rigid structures.
That's not to say that small businesses need to reinvent the wheel to achieve success. Many successful businesses have used existing models, but the really successful companies always contribute something new, even if it's small. The end results can be amazing.
Take Airbnb, for example. In just a few years, they've become a $10+ billion company even though they used an existing model. Sites like Craigslist already had ads for the service they offer, but they decided to focus on just one of them and do it as best as they can. For example, by making it pretty and pleasing to the eye.
On the verge of bankruptcy in 2009, Airbnb discovered that replacing the amateur photos with high-resolution, more professional ones, suddenly increased interest in their offers. Now, they've grabbed a big market share from travel giants who were making money decades before them.
2. Don't Make Paying a Pain
Today’s customer is pretty spoiled. If you want them to choose you over the competition, you have to make it easy for them to order and pay for your product or service.
Few companies have used this in a more simple and elegant way than Uber. You don’t need to call or schedule an appointment, and once you've used their service, you never need to worry about having cash on you, or even a card with you. You just climb out of the car, and you're automatically charged for the trip.
So think about how you can facilitate payment for your customers. It’s not enough to just offer credit card payments on your website. If you need ideas, this guide is an excellent starting point.
3. Know Who Your Employees Are
We're not just talking knowing the name of the tech guy or the new intern. Small businesses may not be under as much increased scrutiny as some big companies are, but after Uber’s employee misclassification lawsuit, many have become more careful.
Many of Uber's drivers feel they should be classified as employees of the company (instead of independent contractors, as they're currently classified) and enjoy all of the benefits that come with it. As a result, a class action lawsuit has been formed.
If you're a small business and planning to expand, you should be very wary of Uber’s case. It seems that federal law is not very clear, so, in many cases, independent contractors would have an easy task proving they can actually be classified as employees. If you're not sure where your business falls, here are some excellent examples, as well as questions to ask to understand if somebody is an independent contractor or an employee.
4. Look Out for Your Employees and Your Business
Your small business will invariably have people that it treats as employees, and it’s in your own best interest to look out for their happiness.
Startups typically pay slightly smaller salaries in exchange for company stock. But earlier this year, Pinterest did something revolutionary by letting employees collect equity on more favorable terms. More specifically, employees who have been with the company for at least two years will be able to keep their stocks for another seven years without collecting equity on them.
This is a huge deal because, in the startup world, the time frame for that is usually just 90 days.
Think of ways like that in which you can really make your employees feel like they belong and are part of your business.
However, you should never forget to protect your own business as well. Many companies use fidelity bonds, in particular, employee dishonesty bonds, to protect themselves. Fidelity bonds are a type of insurance, sometimes confused with surety bonds, that protect the employer in the event of employee theft or fraud. Use this easy-to-follow employee dishonesty bond guide to learn more.
You know that small print about privacy in the footer of your website that no one reads? Even though hardly anyone bothers to read it, you still need to stick to it, because you can be sued if you're found in violation of it.
No one knows this better than Snapchat, the messaging service where photos are exchanged between users with the claim that the photo will be “permanently deleted” after a few seconds.
These are just a few of the lessons small business owners can learn from startup unicorns like Uber, Airbnb, and Snapchat. Each unicorn became successful through its own unique formula. Even if your company never becomes valued at over a billion dollars, there’s a lot to be learned from the experience of these startups.
Which is your favorite unicorn? Which companies have been an inspiration for your small business? Tell us in the comment section below.
Eric Halsey is a historian by training who’s been interested in U.S. small businesses since working at the House Committee on Small Business in 2006. Coming from a family with a history of working on industry policy, he has a particular interest in the surety bonding and alternative finance industries. He shares his knowledge for JW Surety Bonds.