Big Vs Small; How to Start a Business

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New business owners at time get carried away by the projections and opportunities available to the business they're embarking upon and as a result of this fail to evaluate the cost of a business start up.

Take for example

a bank senior manager who resigned her from a position with all the perks and trappings of her former office and sets up a new business (lets say in Interior Decor), rents an office in an upscale location, furnishes the office to the "taste she's used to". She recruits staff that will oversee the business for her - marketing, accountant, HR, all the works.

She networks with the contacts she made in the banking industry and one after the other successfully sets up meetings and gets verbal commitments from organisations about business they intend to give to her. More meetings hold, 3 months pass no business has rolled in. Six months pass, while the kids have to go on their annual holidays, yet no big business has been sealed. Staff are still getting paid - not from business proceeds, but from her personal pocket. She believes that the "expected deals" once they are sealed will make up for the lost time. What if these deals do not get sealed or are scaled down drastically?

My observation about this is - if you have funding to sustain your minimum lifestyle and your business expenses for at least 2-3 years, you can start big if you can afford it, otherwise avoid doing this at all costs. In recent years, several logistics & procurement companies sprung up all over Nigeria and one comes to mind most spectacularly (I will refrain from mentioning their name here). This company in particular (its name is continental in nature) started with a big bang - had over 8 staff at its upscale Maryland, Lagos office. A large amount must have been spent on start up alone as they purchased a marketing vehicle as well as a delivery vehicle and I really wondered how such a low-margin business could start business in such a way. In my thoughts, I believed the company was a subsidiary of an existing successful and thriving business as after discussing my observation with another astute entrepreneur, he suggested that they might have deep pockets and have a different strategy.

Well, since the business no longer updates their website (last update was mid-2011) - I can guess they've either scaled down their operations or are out of business. For me, this is rather too early for a business that commenced business in 2010. Too bad.

If you have to start your business, review all options available to you - you do not necessarily have to start by renting a store when you haven't even learned how to sell an item. Start by selling loads of items from your boot or home (please avoid doing this at your primary place of occupation) and once the income stream is rolling in, you can decide to rent space (it does not have to be all by yourself. I know people who sell shoes but rent small space in a boutique for that purpose. You can scale your business gradually as sales soar. During the small & lean start up period, you can keep reviewing your business to know whether it suits you, whether its profitable enough and whether you can scale it successfully.

Really its cheaper at this small & lean period to make a decision than to invest so much and you're stuck in a vicious cycle (debt, stress e.t.c.)

Taofeek Akinwumi Raheem
A good & wise one
April 1, 2012 at 12:10pm

Segun Ogunlana
@Morakinyo; Sir, you have done it again. Thank you, Thank you, Thank you. Cheers!!!!!. The lean start-up lesson.
April 1, 2012 at 2:32pm  

Ajani Thompson Oyeniyi
This is wonderful and if am grading you Sir i will give you A1 plus. Pick some stuff and i am applying it soon. Thanks and hope to chat with u one of this days to discuss about this more.
April 1, 2012 at 3:48pm 

Olatona Olabode Jefferson
@ Morakinyo,Sir its always brilliant and insighful posts from you.This is a must read for all Afripreneur members.Thanks a bunch.
April 2, 2012 at 6:35pm 

by Morakinyo Mo Beckley

Read 792 times Last modified on Monday, 04 May 2015 03:04
Morakinyo Beckley

Co-founder and COO of Oyoyo Retail Limited and Founder of Bringitbay Limited. He holds a Masters in Entrepreneurship from the University of Essex, UK and a BSc in Economics from Lagos State University, Ojo. He has a background in banking - with exposure to Retail Sales/Operations. He has core competence in sales and logistics and he's an avid reader and tennis player.

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