Yes, it goes against most advice you get from business books, talking heads and entrepreneur gurus. They tell you that you should be well capitalized so you can survive anything that may be thrown your way.If you want to open your own business you do not always need vast amount of capital.
Being well capitalized can definitely help you to survive in the beginning, but on the other hand it can also hurt you in the long run. Not to mention the fact that in the world we live in, it is rather difficult to gain access to unlimited funds for starting a new business. Sooner or later, one runs into some limits on capital.
So why is it advantageous to start a business on a shoestring and to not be well capitalized? In order to be a true entrepreneur, the shoestring budget is the only way. It forces the greatest degree of creativity on an organization, and will become its basic culture, part of its fabric – that best serves the organization in the long run.
When starting a business, one will run into all kinds of problems. Problems that could not have been foreseen at all. Those problems have to be overcome one way or the other. The easiest way to solve any problem is to throw money at it. Usually that works, and any idiot can do that.
In my experience however most problems have multiple solutions to them. Throwing money at them is just one of them. The others require creativity and spending time at the issues. Real brain power has to be used to achieve a solution.
Start-ups that are flush with funds tend to throw money at issues. Start-ups that were established on the shoestring do not have that luxury. They have to come up with a creative solution. They have to use their brain power, spend time and be creative. As time goes on, this kind of creativity becomes the fabric, or the culture, of the organization so that it will be able to overcome issues much better.
Throwing money at problems has a great danger. It does not develop creativity in an organization. So when money runs tight, as it happens sooner or later in any organization, they have no clue how to handle it. They are used to throwing money at the problems and creatively overcoming such issues is just not part of the organization. So they freeze like deer in the headlights and then…well, you get the rest of the picture.
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