Size Matters

A while ago, I wrote on some key things to keep in mind when looking at opening an additional location. I was recently talking to a colleague of mine, and he said that if he were starting a new business, it wouldn’t be in Prague (for the record, at the time, I was based in Prague and our company headquarters was there). When I asked him why, the answer instantly made sense to me, and made me realise I left one very important item out of that previous post: size.

Size matters: the size of your company, the size you want your company to be, and the size of the talent pool in the place into which you’re looking to expand or start your business.

Size matters in both directions. The Czech Republic is arguably the best place in the E.U. to start a business (or, at least, a high-tech business). It has some of the best incorporation laws in the region (you only need about $5,000 in a bank account to start a business); it has some of the most favorable tax rates in the E.U. (a 15% flat tax); and it has a phenomenally well educated talent pool (globally it ranks 11th in math and 8th in science (well ahead of the U.S. and 8th in the world overall, only behind Australia, Macao, Japan, Liechtenstein, Netherlands, South Korea, Finland, and Hong Kong — none of whom provide the other compelling reasons to put a business there).

So why aren’t more high-tech business based in the Czech Republic? Well, because Prague has a population of of 1.2 million people, and the country as a whole has 10.5 million. The whole country (and the majority of people who speak the language) is somewhere between the size of Ohio and Michigan. The reality is, your just not going to be able to find enough of the right people to build a large business there.

Conversely, look at India. I’ve built several successful organizations in India, but don’t let anyone try and convince you that it’s easy. India has 1.2 billion people, and is fairly well educated. The problem with India is the converse of Prague. There might be 10 million people perfectly suited for any one position you’re trying to fill — but you still have to get through 99 unqualified applicants to get to that one good one. It’s exceedingly hard to separate the wheat from the chaff in India.

Which brings us back to where we started. Whether you’re looking to start a business, or to expand your development organization, you need to add size to the equation. Of course, market is a totally different issue. But from a development perspective, you really need to consider how big you are, how fast you’ll need to grow, and what skills you’ll need. There’s a lot of great talent in Minsk — but is there enough to support your needs? There’s a lot of great talent in Beijing — but do you have the resources to wade through the applicants and find the genuinely good ones? The bottom line is, size matters. Not just the size of your business, or the size of your target market, but the size of your prospective employee population in whatever city into which you’re considering expanding.

Good luck and prosperity!

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Chris Richardson has strong opinions on just about everything. Just ask.