What's The Best Size For A Business Start Up?

Starting A Business

Volume V

What's The Best Size For A Business Start Up?

Everything that grows, does so from a smaller size. That smaller size, however, varies depending on the nature of the very thing that is growing. The smallest size is defined by its minimum required nucleus that will enable growth. In other words, the smallest size of anything that grows is defined by the size of the sum of the essentials elements required for it to exist and start developing.  Therefore each enterprise will be of the size necessary for it to be self sufficient and growth capable. The nature of the company will determine the ideal size. The sector of industry gives an idea of general size of companies but as a general rule, a start up company by definition should start as small as possible, how small is what needs to be analyzed on a case by case basis

No matter how much capital you dispose of, to start your company, you do not want to waste it. That would poor management and a sure sign of failure. An enterprise is supposed to use capital as fuel to ultimately produce more capital than it consumes. If not it is called a charitable organization and not a For Profit Enterprise. With that in mind, you need to assess what is the minimum your company needs to be able to function properly and deliver a profit, so it can fuel its own growth, without additional injections of capital into the company from your personal pocket of that of your partners. That will be the minimum in terms of resources, be it capital, human resources, equipment, tools, furniture, accessories and real estate.

As previously stated, each company's minimum will be different. If you are a consultant, your minimum will be yourself, and office equipment such as a computer, a telephone and your brains. That is what will enable you to prospect, meet your clients (using public transportation), open your first account, provide your intellectual service and get paid for it. As you develop your business, you will get more clients and there will be more work to be done in less time than you can physically process on your own in a regular 24 hour cycle. Then you will need to get better equipment (additional software) to improve your administrative tasks in quality and speed. This will free up some time for you to dedicate to the extra consulting work. As you grow more, you will need to hire from time to time an assistant to handle your administrative tasks (a virtual assistant comes to mind, which allows you to pay only for the work being done and only when it is needed). That will enable you to dedicate all of your time to working for your clients. ultimately you will continue to grow and you will need to hire administrative staff full time (at one point it will be cheaper to have an administrative assistant on staff than a virtual self-contractor) and even hire other consultant to share the work load. Eventually, more equipment such as company cars, better telephone systems, office equipment...etc, will be required but by then you'll be well on your way.

If your company is in the business of Buying and Selling things, you will need at least a place to store the goods and most likely  a place to sell them from. Your minimum requirement in this particular case would be for you to lease a small warehouse that includes some office space, or simply a store with a back office. This will be where you will store your goods, administer your company and receive your clients, like a regular store, retail or wholesale. As you grow and acquire more goods to keep up with the pace of sales, you'll increase the size of your business premises for storage, your office space to receive more clients and house more administrative staff so you can sell more.... so you can buy more, so you can sell more... and so on. 

In the case of a company that is in the business of making things, like a manufacture. You will need a place to store your materials, space to house the machinery and the staff who will make the things you sell. You'll need to store the finished product even temporarily until you either deliver to your customers or they come and pick it up. You will need an office to administer and receive the customers and suppliers. Between the investments in a larger facility, than the previous two company examples above, investment in the acquisition of the machinery and equipment for the manufacturing process, and associated logistics requirements (receptions of materials and delivery of goods), your minimum size for this company could be twice or more the size of a regular buy and sell business. 

If you are in the Mining or Agricultural business, your minimum requirement, requires larger land investment, either as concessions or outright acquisition, more equipment, costlier logistics, large office staff and larger producing staff. The same applies to even the smallest of Construction business, which often requires a minimum investment in tools, materials, equipment and transportation.

The fact of the matter is that you do not wish to start your business as a "large" business. Assess what you need to produce to exceed your minimum financial requirement in terms of sales to break even, and equip yourself to meet twice that minimum requirement. This will give you time to develop your sales gradually. So by the time you need to reinvest into your company, in order to grow, you would have generated sufficient income and acquired the needed experience to increase the size of your company, just enough so you can keep a steady pace of growth, without overextending yourself.

In conclusion size only matters in terms of the least amount of the resources required to function properly to generate and deliver on the first sales. As the sales grow, the rest of the company will grow along with it.