Why entrepreneurs must always start small

Successful business owners always advise those starting out as entrepreneurs to start small. But why should you start small if there is a big market for your product(s) and you have the capital to start big?

Regardless of the size of the available market for your products and how much capital you may have, here are two reasons from my personal experience why starting small is the best way to build your business.

1. You avoid making big losses

The primary objective of any business is to make a profit. Profit, however, is earned at the end of a series of interlinked business operations that include production, marketing, sales, taxation, etc., which you, as the business owner, must test in the smallest viable form possible to find out if those operations together can indeed return a profit for the business before scaling it.

The confidence to start big is often based on the assumption that the untested business operations will undoubtedly produce a profit and so the entrepreneur invests heavily to maximize profit. Unfortunately, sometimes, especially in the early stages, the business will make a loss instead of a profit and the loss made will be proportional to the investment made.

For example, if with an investment of Shs 100,000 the business makes a loss of Shs 10,000, investing Shs 1,000,000 is likely to make you a loss of 100,000. On the other hand, if the business, while still operating at small scale, is giving you a profit of Shs 10,000, then you can be almost certain that if you double your investment, you will also double your profit.

Losses can permanently cripple your business or snuff it out completely so you must do everything to avoid them such as starting small.

2. You get to master your business

Many businesses have collapsed because the owners did not have a full and comprehensive understanding of the operations within their business hence giving the employees and other people room to steal from the business unnoticed. This risk is however greatly minimised when the business owner knows how every aspect of their business operates and the numbers associated with each aspect.

For example, if you want to venture out as a poultry farmer, before you scale to 1,000 layers, first rear about 20 birds and record how much each bird eats, what medications they need, their mortality rate, how many eggs they can lay, and the financial implications for all that.

Then, with this knowledge, you can scale your poultry farm and even hire other people to help you manage it because you are in position to effectively supervise them using the facts you already know about the business.

Starting small will give you, as the business owner, ample access to all operations of the business hence enabling you to know your business like the back of your hand.

It is very hard to know your business well when you start it big because it will start already having [many] delegated responsibilities and as the business owner, you will have no choice but to rely on whatever you are told by the people running the business as the facts about the business even if those facts have been manipulated.

In a nutshell, starting small is like a pilot starting their flight on the runway. It is not an insult to your entrepreneurial potential (as it once seemed to me) but rather very good advice that you should heed if you want your business to soar to great heights.

The author is a communications expert and entrepreneur 

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