Recently I have been reflecting upon the merits of small versus big business in terms of entrepreneurship. Most people think of entrepreneurs as individuals who have big ideas that are out to change the world. This is certainly true to some extent, but are world changing ideas, and the big risk associated with said ideas really all that it is cracked up to be?
Consider the popular path perpetuated by the media and emerging startup industry. An entrepreneur experiences an epiphany and takes the idea and generates a slide deck and/or basic prototype. Said entrepreneur next secures funding through early investors and spends the next few years developing their idea and gaining early market traction. After a few years this entrepreneur will either end up becoming a millionaire/billionaire and building an empire or going bust and losing everything. Potential big payoff, but also very risky to the entrepreneur.
Now let’s consider another option. This same entrepreneur experiences an epiphany, but instead of deciding to go big, chooses to test their idea on a single customer. For simplicity, we shall consider a consumer product for an e-commerce store. The entrepreneur builds a minimal e-store, or better yet leverages an existing community platform, and populates this store with a small number of products. Upon receiving the first sale, the entrepreneur has validated their business model and begins to proceed by slowly expanding the e-store. Alternatively, if no sales occur, the entrepreneur refines their product and/or e-store until sales are achieved. With each sale it is critical that the entrepreneur executes flawlessly and ensures that each sale is profitable.
Rather than a big bang approach the entrepreneurs builds, tests, evaluates, and refines their market offering through successive cycles. Success is measured by sales revenue – all other metrics may be useful towards growing sales, but are merely of the feel good type, and less important than actual sales. Fast forward a few years and this same entrepreneur has a business, or multiple businesses each generating consistent revenue. If the business idea wasn’t viable, the entrepreneur has lost only a small amount of resources in terms of nominal time and money investment.
The second approach does have a downside. This type of business most likely will not “pop” and experience explosive growth in a single day. It will however, provide consistent, sustainable revenue over time. Better yet, this process and type of business is highly repeatable. Once the first business is built and basic process automation is in place, you may begin building a second business to further spur growth.
Comparing the two types of entrepreneurship is like considering the differences between Warren Buffett and technology investors. Warren Buffett uses a consistent methodical approach to generate sustainable returns over time across his portfolio, whereas technology investors tend to spread their money around and hope for the one big hit.
In terms of entrepreneurship, neither approach is right or wrong, it really just depends on your personality, risk tolerance, and available resources. A simple, repeatable, predictable business, or “Buffett Business” is a great way for an entrepreneur to build income/revenue over time with little risk and a small amount of resources. Better yet, this approach allows for the creation of multiple streams of income.
To learn more about how to implement this approach to entrepreneurship refer to my e-book “Social Business Process” available at Brilliant Basis.