Briefcase Companies

iNote - Briefcase Companies

I always thought “briefcase company” meant a fraudulent enterprise. It wasn’t until I started my own business that I truly understood what it entails.

A briefcase company is a business that can fit entirely into a briefcase. Specifically, during its initial stages, the company may have minimal personnel, simple operations, and even no physical office space. Business licenses, company seals, and financial records are all carried around in the owner’s briefcase, hence the term “briefcase company.”

Many startups go through a phase of being a briefcase company. This stage isn’t inherently problematic; what’s concerning is when entrepreneurs identify themselves as briefcase companies and remain stagnant without striving for growth or expansion.

A briefcase company should be a temporary stage in a company’s lifecycle, not its long-term identity. To outgrow this phase, one must adopt a calm and resilient approach, taking steady and deliberate steps to build the business.

It’s crucial to act within your means. Avoid wasting precious initial capital on renting luxurious offices or purchasing high-end furniture just to create an impressive facade. In the early stages, having a functional space to work and meet clients is sufficient.

Similarly, hiring should focus on efficiency. At this stage, you need individuals who can handle multiple roles and thrive under pressure, not those looking to coast. Avoid overstaffing for non-essential roles; instead, prioritize lean operations. Departments like finance, administration, and HR can often be streamlined or handled on a part-time basis. Saving one person’s salary could extend the company’s runway for several months, potentially bridging the gap to the next round of funding.

Many startups today leverage coworking spaces or incubators. While these spaces offer resources and may have assessment standards, especially government-run incubators that monitor employee numbers, financial flows, and operations, don’t stretch your limited resources just to meet their expectations. A cautionary tale is Shi Yuzhu’s Giant Tower, where excessive resource allocation to satisfy government demands ultimately led to the company’s demise.

Starting a business is a marathon, not a sprint. The founder’s primary concern should always be how to allocate resources wisely to endure to the end. Whether your company operates out of a briefcase in its early days is inconsequential compared to the long-term strategies needed for survival and growth.

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Published on 2024-12-09, Updated on 2025-02-02