Why Being Under-Funded Could Actually Help Your Business

culled from:inc.com

By Paul B. Brown

It is the second thing that people always tell entrepreneurs.
After they say, you need to have a business plan (and as I have written about before, I don't think you do) they'll add: "you also need to raise a lot of money before you get underway."
I think that piece of advice is over-rated as well.
I understand the position of the people who say, in essence, "money is good. And the more money the better." It allows you to move faster and if you fail, it's no big deal. There will be additional funds where those came from.
But I believe that reasoning is flawed.
Now, let me explain.
If we were talking about my personal money, I have always been firmly in the "more is better" category.
But when we are talking about funding a business I think money can be a liability. Not a huge one, but a liability nonetheless.
Here's why. We have argued from the beginning that in the face of uncertainty Action Trumps Everything. If you face a situation where you can't predict the future you want to:
* Determine your desire, i.e. what is the outcome you think you want.
* Take a small step toward finding or creating something that will allow you to capitalize on that desire
* Learn from taking that small step.
* Build off that learning and take another step. And then
* Learn from that one...and so on
It's a model that we call: Act. Learn. Build. Repeat.
As you can see, implicit in the model is that you take small steps because you want to move quickly and you don't want to waste resources (like time or money.) Wasting money isn't a problem in and of itself, if you have lots of it. The problem is what it does to your timetable and the efficiency of your actions.
If money is not an issue you may decide to say that there is no need to take small steps. Why bother learning what the market wants. You have enough money to see if your hunch is right.
Taking large leaps with unlimited funds is certainly an approach you can take It just isn't a very wise one. You always want to be solving for a market need.
Having less money forces you to do that. It also makes you more creative.
Yes, having money is a good. But not having it is not as big a liability as you might think.