Every entrepreneur needs two things (besides a good idea) to get a new venture off the ground: time and money. These assets are generally inversely proportional — the more you have of one, the less you need of the other. The most successful entrepreneurs understand and apply this reality. They find the right balance of the two to develop their new business efficiently, on time and under budget.
You Need Capital
The old adage “it takes money to make money” is still true. There are very few legitimate businesses that can be launched effectively for zero dollars. Having plenty of cash on hand is, for the most part, a great way to start out. With cash reserves, you can push an aggressive marketing plan and outsource noncritical tasks so that your full attention is on the core competencies of your venture. You can hire the help you need and buy all the supplies and tools of the trade that will make the launch that much easier.
In reality, however, it is better for a startup to bootstrap — to keep the expenses as low as possible during the launch. A culture of financial efficiency from the start will pay off in better financial controls over the life of the venture. Often, companies that start out with plenty of cash incubate a culture of waste that can come back to bite them later. Still, some capital is necessary to successfully launch just about any type of business. And, the less cash you have available, the longer the startup is likely to take.
You Need Time
The amount of time it takes to mold a business from idea to profitable venture depends on a number of factors. In general, however, the less cash available for the startup, the longer it will take to be making money. Bootstrapping entrepreneurs generally take on every aspect of the launch rather than outsourcing non-core tasks, resulting in a slowed development. In addition, the marketing budget tends to take a significant hit in bootstrapping. Free marketing is possible, particularly for local and online-based businesses, but it definitely takes more time.
The greatest difficulty arises when an entrepreneur is launching a new business on a shoestring but also needs to generate an income as soon as possible. Desperation often leads to poor decisions…and usually end up costing far more than expected. Be realistic about how long it is going to take to start producing income, then double your estimate. Set aside enough cash to keep you afloat during that time before you commit to the business full-time. Otherwise, keep your day job while you work through the startup process. Yes, it will take much longer, but you are likely to make more sound business decisions if you are not burdened by being completely broke.
Time and Money Equal Success
The reality is that most businesses don’t start turning a significant profit for at least a year, often longer. Launching a business is an extremely difficult but rewarding experience, and requires sufficient time and cash to become successful. Bootstrapping a startup is beneficial all around, but it is important to acknowledge that less cash means longer hours, and a longer lapse of time between launch and profitability.