Small businesses are wasteful and inefficient (relatively)
Smaller, independent businesses are very much in vogue at the moment, which I can understand. They feel more authentic and have bigger personalities, something which is crucially important for customers looking to identify with a particular brand. Nobody wants to be perceived as mainstream and greedy, which is why Coke and Pepsi are seen as the enemy in business. Instead we all want to be known for standing up for the little guy, original and on trend; hence the appeal of start-ups.
However, there is one big problem when little companies try and compete with big companies; start-ups are ultimately inefficient and wasteful by their very nature. Doing things on a small scale, whether its providing goods or a service, may feel special but is the opposite of how a business should run. A business should look to make money and keep costs down – simple right? However, only when a business has the opportunity to scale up, does it actually start doing these things best.
This was one of the few things we realised early on with Lashbrook Lassis. We knew everything we did on a small scale would cost us money. For example, when we bought yoghurt for our lassis, we only used as much as we needed. Very sensible you may think; but when the transport costs were fixed and ended up being more expensive than the yoghurt itself, it started to become a bit ridiculous. Furthermore, just to get our suppliers to make up our fruit compote, we needed to place a minimum order. Yet we never managed to sell all our drinks and so ended up giving most of them away as samples. Even our machinery was relatively slow and required huge amounts of man-power to operate.
It became so blindingly obvious that everyone else like us was in the same position, I began considering whether we would be better off becoming full time, small scale drink manufacturers. However, we eventually met someone who was doing exactly that and we could see it wasn’t working. To do anything on a small scale, even if its full time, will at best make only a small amount of money but will always be a waste of resources.