Small vs Large Firms: Is Bigger Always Better?

During my job search I was lucky enough to snag two offers from two very disparate firms. One was an established name brand company on the West Coast and the other was a small, unknown firm back East. After careful deliberation I decided to cast my lot with the smaller firm. I have been on the job for almost a year now and in hindsight I made the right choice for my career.

While it's been a good experience so far, there have been some speed bumps along the way. I do think that if you find the right job with the right mentor, working at a smaller company can be a fantastic learning experience. However if you do start working at a smaller company, you have to be prepared to deal with several issues that you would not be faced with at a larger, more well-known firm.

It's Not All Sunshine and Roses

The first issue is training. At my firm there was none. I had done a few excel modeling courses to prep prior to starting work but I was thrown into the fire immediately. This made my first few weeks very stressful. I was tasked with modeling land development deals when I barely even knew the basic land development verbiage which made things very difficult. I was forced to work through our models and diligence processes on my own and while I quickly got up to speed I would have really appreciated a training program.

The second issue regards exit opportunities. I have learned a lot on the job so far and my skills are improving all the time. Yet since no one really has heard of my company if and when I look for my next job they won't know what I can do. If you work in the real estate group at Morgan Stanley or Goldman, the big real estate funds while have a pretty good sense of how well you have been trained and what you are capable of. While I may have a similar skill set future employers are going to have a hard time evaluating me. However part of the reason I joined this firm is because if it's a success I may not have to move, I can simply grow with the company.

While I expected those two issues, the last main problem I did not expect. There are only five people in our main office (we have offices onsite at each of our deals as well), and of those five I am the only analyst. Our managing member, chief operating officer and controller are all in their 40s and have families. There is not really anyone for me to talk to during the workday and I can't do typical office stuff like grab after work drinks with my coworkers. This is the one thing that irks me. I was new to my city and it was really hard to meet people since I did not have a built in network through work.

The Pluses Outweigh the Minuses

While these issues have cropped up my experience so far has been great. I do really enjoy my job and I'm excited about our future. The compensation is great and I have learned a lot. For example having such direct access to our managing member and COO has been tremendously beneficial. My boss was a principal at a big REPE fund prior to founding our company and if I was an analyst at that fund I'd be lucky if he knew my name. At our company I get to sit and work through models with him and see what his perspective is on our prospective deals. Being able to think through different aspects of deals with someone who has 20 years' experience has been an incredible learning opportunity.

If you are faced with the same decision as I was, make sure that you really think about what type of environment you thrive in. Working at a smaller company can be a wonderful (and potentially very lucrative) experience, but before you accept an offer make sure you think about the drawbacks as well as the benefits.

Comments (58)

Sep 12, 2013

Just graduated in May and am in an identical position as you, only at a commodity trading firm - 3 man, including me. Getting ridiculous insight into the ins and outs of every area of finance, improving my modeling skills, and getting CFA paid for on top.

Bottom line: I wouldn't switch to a larger firm right now even if I could. I fucking love where I'm at, and think (hope) that I can stay for the long haul and possibly become a partner someday down the road.

Great post, thanks for sharing!

Extremely bullish on Heidi Klum, currently.

Sep 12, 2013

One advantage of working for a big firm imo is the job security. small shops fire employees periodically if they fall short of budget. big firms don't tend to do that because they've got tons of cash reserve.

Sep 12, 2013

I am at a small firm and really enjoy it as well. The three points you mention are definitely valid. Fortunately, I have a pretty established social network in the Chicago area so the last point hasn't affected me as much.

Sep 12, 2013

I'm at a small firm and I love it. No BS, more incentives and what you do really feels like it matters. Plus, there's no better feeling than being seen by the seniors as an equal.

Sep 12, 2013

The main benefits of working at big firm are deal flow/size, pay (generally), and name brand. A huge emphasis on the third point. Am I missing something? Because training was definitely subpar.

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Sep 12, 2013

She told me bigger is always better...

Sep 12, 2013

I work for extremely large asset manager, however am in a very small and isolated group. One of your points really hits home, nobody to talk/bond with. Everyone is about 10 years my senior, so it has me seriously thinking about switching somewhere down the road to BB or somewhere I can A) build camaraderie B) receive more intensive and structured training. May sound counter intuitive to go from buy to sell side, but I think it will benefit me in the long run.

Sep 13, 2013

Similar situation, although we do have some back office staff with whom I get along well and am happy to go out with. But would still want to have a bigger/better circle (limited stuff to talk about with the BO guys). Most importantly, I'm in a region where in casual situations, the local language is spoken predominantly and I hardly know a word or two. That can push me out of conversations some times.

So did you find any way to handle this part?

Sep 13, 2013

It's gotten better the longer I've worked here as I'm now closer with my co-workers simply because we're all familiar with each other however it's still not ideal. I've made friends who do similar jobs at other firms and that's been awesome as they've really eased my transition into a new city.

Sep 13, 2013

As we are in a very similar situation I would agree with all points. Learning through a fire hose is rough at first but should prove to be a more meaningful learning experience. Brand name is a drawback but if we build the right network, I think experience and work product will trump. Although this could be a naive viewpoint.

Biggest drawback by far is building a network of peers, in terms of age. How have you guys approached this?

Sep 13, 2013
youngsimba:

As we are in a very similar situation I would agree with all points. Learning through a fire hose is rough at first but should prove to be a more meaningful learning experience. Brand name is a drawback but if we build the right network, I think experience and work product will trump. Although this could be a naive viewpoint.

Biggest drawback by far is building a network of peers, in terms of age. How have you guys approached this?

Joined the local CFA society and attend all of the happy hours and events they put on. Has been a great way to meet and talk to people in the industry.

Extremely bullish on Heidi Klum, currently.

Sep 14, 2013

@Justaguy, thanks I will look into that for sure. Looking to join ULI as well, given my role is in RE.

Sep 14, 2013

I wouldn't necessarily classify Lehman as a "small firm." Do you mean traditional investment banks vs. banks?

Sep 14, 2013

Banks like Citi, JPMorgan, BofA, HSBC have tremendous balance sheet capabilities - a better ability for providing financing. These banks are also more diversified (commercial banking, etc.)

Sep 14, 2013

A lot of the big banks like Citi, BofA, Wachovia are able to muscle their way into deals because of their lending capabilities. That means you will be on a lot of deals, but you will do a fair amount of debt work.

Lehman is for the most part a debt shop. They are on almost every major debt issuance.

With smaller firms that don't have the balance sheet, you will see a lot more equity deals than debt (if any debt at all) and M&A.

Also with the smaller firms, you likely won't see your deal on the front page of the journal but you could find yourself doing more deals as smaller ones often take less time to complete.

Sep 14, 2013

His perception sounds a little bit like a case of the grass is greener on the other side to me. We definitely have people stuck on constant year ends. I wouldn't say its the norm but it happens to a minority of people in our major market office and I hear the same horror stories from friends at other firms in my area. Now if the majority of his office was working busy season all year then yeah.... they got it bad.

It pretty much comes down to a function of how many clients your firm has and how well staffed you guys are to meet client demands. Offices in major markets can easily be understaffed. We have an industry wide shortage on seniors due to the terrible market a few years back. Hence why most firms are stretched very thin at seniors. It's not like in our office, seniors who are on 3/31 YE and 6/30 YE get a free pass to do 40 hour weeks during normal busy season. Staffers and the powers that be may cut them slack and try to the put these people on "easier" jobs during busy season. But at the end of the day if they need you somewhere, they're gonna put you there. And you also still have a billable hour requirement to meet regardless of whether or not you have a later busy season. At least that's how it is in my office.

Sep 14, 2013
naeko31:

It pretty much comes down to a function of how many clients your firm has and how well staffed you guys are to meet client demands. Offices in major markets can easily be understaffed.

Which do you think tends to be more "normal hours", as in 40 or so during regular season and a few months of busy season from jan-mar/apr of about 80 hours or less? Obviously a smaller office will have way fewer clients but way fewer staff, whereas a larger office will have 10x the staff with a much bigger client base as well.

Besides your input, I've only really heard completely opposite stands on this, rather than in between like yours.

Sep 14, 2013

was service line are you referring to within the large and small accounting firms? internal auditors, external auditors?

Did you fly over my helmet?

Sep 14, 2013
DaveWinkler:

was service line are you referring to within the large and small accounting firms? internal auditors, external auditors?

External. Its Big 4 audit. I'm not comparing differing size firms, I meant within a given Big 4 firm, different office sizes in different cities

Sep 14, 2013

I've only summer interned + busy season interned and will start FT in a month so I don't have much exposure to what hours are like the rest of the year beyond my conversations with coworkers. There are instances where you will have to work bad hours despite not being on a YE deadline or a review. A coworker was put on a client during the summer that we just picked up and the team worked till 10 nightly to clean them up prior to busy season. Other people with more experience can probably think of other situations where you will work long hours during offseason.

Can't give you an average number of what to expect post busy season simply because you could easily be the guy whose staffed on amazing jobs where you leave at 6 daily. Or you like the senior could be on perpetual YE's. The reasonable expectation would be expect worse case during busy season and be ready for bouts of bad hours during the year as situations arise. The most important thing is don't buy what recruiters tell you of worklife balance. Sure our hours are generally not close to banking hours. But to expect 40 hour weeks 9 months out of the year is misguided.

I'm with a large midtier, but my friends at B4 all seem to have similar experiences. Back to cramming for FAR for me

Sep 14, 2013

OK, first I should clear something up. Recruiters try to sell you this "it's busy in January and February and a little during the quarters, but the rest of the year is a pretty normal 40-50 hours". Some perspective: my first client was in financial services, and we audited funds, not company financials. Translation: busy season from January - March. For my second client (a utilities firm) we were doing 10-q procedures, an acquisition, and a governmental agreed-upon procedures "audit". Translation: busy season from April - May, plus I had to drive an hour and a half both ways every day. June - July I was on a 3/31 year end client, so more busy season hours. Finally in August I got a break. Starting in September, I started on hard close (an audit as of 9/30 that we would roll forward for year end purposes) on a conglomerate, which continued through December. January began official busy season, then when we filed I jumped to help 3 other teams finish their busy seasons (deadlines for 10-k filings are longer for smaller firms, so busy seasons are more intense but shorter for big firms). Translation: busy season through April.

A lot of it has to do with luck of the draw - you can get killed at a small or large office. The worst thing is when you are on a bunch of small clients, so you can't plan down time like you can when you're just on one large client all year round. Honestly, there's just nothing you can do about it for your first year or so.

Sep 14, 2013

Don't you have your whole life planned out.

Sep 14, 2013

If you have a serious interest in Comp Sci, take a long, hard look at UIUC.

Essentially, if you have any level of technical competence, you are making a mistake by not studying EE or Comp Sci these days.

Sep 14, 2013

Umm... if you are accepted E/D aren't you obligated to attend unless under extreme circumstances?

Sep 14, 2013

Actuarial exams, CFA and a MBA? Hmm that might be a little hard..

Sep 14, 2013
Powa23:

Actuarial exams, CFA and a MBA? Hmm that might be a little hard..

Listen Kid, just listen to what I tell you. Go with Stern. You'll thank me later when you graduate. NYC is full of them.

Sep 14, 2013

Notre Dame, NYU, BC, and Villanova (in that order), will give you the best chances of breaking in.

- Current ASU student

Sep 14, 2013

Its always better to join the biggest name possible, regardless of whether you think you'll be doing real work or if the pay is less than desirable. Exit opps would be better. Besides, it would look better on your resume when applying to the top business schools in a couple of years. While $1b isn't really all that small these days, there is always the possibility of the fund folding.

Sep 14, 2013

Forget the name. Do the work where you build the skills YOU need to be successful in the career that YOU want long-term. Forget everyone else.

Sep 14, 2013

Don't listen to gubbier. Great experience, great pay, great culture at a $1b fund...? Stay there for your career, next fund could be 2b, then 4 if the fund does well. Who cares about the name, develop your skills and relationships and it will get you further than a name on your resume.

Sep 14, 2013

I would absolutely take the mezz role.

Sep 14, 2013

I agree with Billy Ray Valentine. Also, you got to realize that at some point you need to stop doing things for your resume and actually start doing what you want. Many people, including myself, have built their entire careers working at smaller shops. Besides, a $1 billion fund isn't that small and it sounds like it is a great fit for you. Take the mezz fund and don't look back.

Sep 14, 2013

Ditto the above. $1B isn't all that small, and if it seems like it will offer the best learning experience, go for it. I think people tend to think too much about where their next step will place them in terms of name brand, rather than which opportunity will give them the best learning experience to become a skilled investor. The cream will always float to the top, while name brands come and go.

Sep 14, 2013

$1B for a single mezz fund is not small at all - actually puts them among the bigger players in that space. You should absolutely take that position. Should be a great learning experience for you.

Just to give some context, according to prequin (rough estimates since i dont have paid subscription), the 3 largest us corporate mezz funds raised in 2011 were 1.05B (KKR), 1.0B (audax) and 950MM (Morgan Stanley), though GSO is currently raising a $3B fund.

Outside of goldman's fund, there really arent any "mega" mezzanine funds.

Sep 14, 2013

Really appreciate the replies folks!

Follow up question. Would the mezz fund allow me to go to a larger place, perhaps a BB lev fin? I kinda want to get my ticket punched with a brand name at some point. I know from observation on LNKD that many ppl at the asset manager have tended to stay among the big name places.

The reason why I want to be at a brand name is because I had a similar decision to make for summer internship. I had a choice btwn BlackRock(a support group within pmg) and a fledgling, lesser known ibank. I chose the latter for the experience. Surprisingly I had a tough time with OCR because the bank was not well known even though I had an awesome experience and did things an intern would never do. A friend of mine chose a top BB AM but did only grunt work but able to spin it off as the greatest thing in the world. And he got a lot more interviews he said due to the brand name.

Sep 14, 2013
YGCS:

Really appreciate the replies folks!

Follow up question. Would the mezz fund allow me to go to a larger place, perhaps a BB lev fin? I kinda want to get my ticket punched with a brand name at some point. I know from observation on LNKD that many ppl at the asset manager have tended to stay among the big name places.

The reason why I want to be at a brand name is because I had a similar decision to make for summer internship. I had a choice btwn BlackRock(a support group within pmg) and a fledgling, lesser known ibank. I chose the latter for the experience. Surprisingly I had a tough time with OCR because the bank was not well known even though I had an awesome experience and did things an intern would never do. A friend of mine chose a top BB AM but did only grunt work but able to spin it off as the greatest thing in the world. And he got a lot more interviews he said due to the brand name.

That's what I said. If you're looking to launch a career by all means take the mezz fund offer but if you're already looking to leave at the first opportunity why not go for the brand name?

Sep 14, 2013

Someone's going to say it, so it might as well be me:

"Search WSO", "Google", etc.

TL;DR - Boutiques can be a crapshoot. Are you feeling lucky?

Sep 14, 2013

There are pros and there are cons. As everywhere.
As said above, you might be lucky to land in proper small firm with deal flow or not.

My opinion is that summer internships are mostly for resume than for experience anyway, because during 1-2 months program it is not likely that you will be assigned something complex.
However, it may help you to
- make network
- get full-time offer
- get IB on your resume

However, if you aim at obtaining FT offer from 1-10 person shop, I would like to share my story briefly.
I work in 5-person PE/advisory shop, and now I think it is the best decision I've ever made (although at first I was hella scared joining it after working for a 100k+ employees MNC).
Even at analyst level I had so many responsibilities, freedom, etc. Pretty much no reporting and no supervision (only result matters), direct contact with investors and financial institutions, etc. - I had it all from day 1 (not because I am that cool, just because there were no other people to do things on a daily basis).
Remuneration is slightly below BB level, but on per-hour basis it is definitely better.
Deal flow is pretty fine.

Of course, working in large banks/boutiques has its cons, especially in terms of brand name and further exit opps and deal size (most of the time). But for personal experience, working for a very small shop with solid deal flow may be incredable, that is what I have found.

Sep 14, 2013

The first con I think of is if there only 10 people max. the odds seem inherently low to obtain a FT offer.

Sep 14, 2013

I personally also did my very first internship at a 5 man M&A boutique and it helped me to land a BB summer position the year after. This was mainly due to the fact that I was able to talk about the deals I was working on and actually show how I was involved and how i contributed. I think that this is really the major advantage you have when working for such a small and lean firm. The drawbacks are obvious as well though: If you have 10 people in the office you better get a long with everyone, or at least with the majority, or otherwise you will have a bad experience and maybe even only get to do bullshit over the entire summer.

Sep 14, 2013

definitely helped..good call

Sep 14, 2013

You have the brand name of a Big 4 and now hopefully a great opportunity to demonstrate leadership/management skills on an entrepreneur-level. I think you should be good as far as work experience goes, for future MBA applications.

Sep 14, 2013

No one that is 40 works their ass off. Especially if you are at a top PE firm as a MD. 250k is also very low after taxes and you probably won't be able to afford any top golf courses with that amount of cash. Sometimes a country club costs 100k a year.

Sep 14, 2013
boutiquebank4life:

No one that is 40 works their ass off. Especially if you are at a top PE firm as a MD. 250k is also very low after taxes and you probably won't be able to afford any top golf courses with that amount of cash. Sometimes a country club costs 100k a year.

What country club costs 100k each year?? Granted, my experience with clubs is in the southeastern US, but even the nicest clubs in the South max out around 125K for initiation fees. Once you are in, you pay MUCH lower fees per year.

Granted, you could rack up 100k+ each year depending on your usage (play golf with guests 4x a week, eat at the formal dining room with several bottles of high end wine multiple times a week), but to say that country clubs can cost six figures a year is misleading. Just my opinion.

"I'm not sure what the four 9's do, but the ace, I think, is pretty high."

Sep 14, 2013

Bluehorse

I think you are underestimating the difference in cost of living in the NYC area vs the southeastern US

Best Response
Sep 14, 2013

In a small boutique, be it trading house or deal-making place, the key is to get a percentage cut of whatever comes into business. From retainers, success fees, any profit they generate. This makes you equivalent to equity partner without downside risks (other than you not getting paid in case there is no business coming in). Make sure you have them in written, so you can take them to court in case they refuse to pay.

The job market figures that just came out last week are not reflection of what actually goes on. Many feel absolutely stuck and take whatever job they can get. So yes, these positions will be filled.

Boutiques are not for everyone. It's you eat what you kill. In a big company, you can hang around and still get paid (and bright futures).

Yeah, welcome to the real world. It's the brand names that matter, not the results.

But if you think about it, your base is 40k and you get 7% of every profit, it seems fair. 40k pays the rent and food. Your so called bonus is what lets you live as a banker.

    • 2
Sep 14, 2013

The job market figures that just came out last week are not reflection of what actually goes on.

True. +1.

Sep 14, 2013
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