The Fundamental Difference Between A Small Business And A Big Business

For a lot of us, it takes only an intense formal education and some mentoring to recognize that it's perfectly okay for a company to spend way more than its income in the first years of its existence. And it takes some huge mental shift for us to deliberately pour more money into our business than we are sure of recouping in the next 2 or 3 years.

That is why there are mostly small businesses in Nigeria. The founders avoid spending more than they earn. They fit the business plan and size to that of their pocket, and then keep the business on a  non-ambitious path.

The fundamental difference between a small business and a big business is leverage. Mostly financial and logistic leverage. The big business is funded from a pool of money from several investors and bank borrowings. It is started, or at least run, with a very big ambition. The owners are going for a very big kill. They want to take the entire market. The want to expand aggressively. They want to go global. And they have no trouble spending more than the business earns.

image: profitclinic.com

Leverage is all about multiplying your results by using resources that are not yours. And in the business world it often involves using funds that are not yours, spending way more than you are earning in the beginning and going after a big share of your market. 

For someone like me with a geeky background, the number of hoops to jump are a lot. You first have to change your mentality of relying on your skills. Then proceed to killing your fear of making mistakes, especially ones with financial consequences. Then get used to spending both your energy and money without the assurance of making the money back soon. And finally, overcome the innate resistance to giving control to other people and using resources that are not yours.

For some other people, the hoops are much fewer. A salesperson is probably used to leveraging other people's resources and may only have to work on getting used to spending way more than he is earning in the business.

The big gain in business is in taking big bets. And as long as you are limiting your business to your own resources, you are not yet taking any big bets. Big bets involve leverage. The better you are at leveraging, the bigger your chances of building a big business.