STARTING OUT SMALL PAYS OFF, SURVEY REVEALS

Entrepreneurs who work alone instead of hiring staff in the early days of their business venture are more likely to succeed in the long-term, a study from the Bettany Centre for Entrepreneurship at Cranfield School of Management has revealed.

The research, which investigated whether the start-up size of a new business makes a difference to survival and success rates, confirmed that entrepreneurs who take their time and build their workforce slowly as their business develops have a higher chance of surviving and becoming successful, compared to entrepreneurs who hire staff at the time of start-up. 

Among the new ventures that hire employees, the annual closure rate is more than halved when the entrepreneur initially starts up on a solo basis, compared to those who were previously in employment and start a business with employees from day one.

The research, which was jointly undertaken with Panteia/EIM, a market research specialist based in the Netherlands, and the University of Huelva in Spain, concluded that by starting small an entrepreneur can find out whether there is demand for a product or service before investing more heavily in the business.

“Too often aspiring entrepreneurs think that starting a business with all the financial and resource characteristics of a successful established business is a ‘professional approach’ to entrepreneurship that is more likely to succeed than a start-up based in somebody’s bedroom,” says Professor Andrew Burke, a director of the Cranfield Business Growth Programme. 

“The data does not support this view. By contrast, we have found that a lone start-up creates a positive double whammy by lowering risk and increasing the flexibility of the new venture.

“The analysis also shows that the importance of starting out small is stronger for service industries compared to manufacturing industries, because economies of scale are less important. It also indicates that prior entrepreneurship experience - acquired in other businesses - contributes positively to the performance of entrepreneurs who go on to create sustainable jobs.”