I’ve started three businesses from scratch. Two of these were service based businesses and the other was a subscription box business. Two of these businesses were easy to start and quickly generated revenue. One was a slower burn. But which business was which?

If you are thinking that the two service based businesses were the easy starters, you’d be half right. My first service business and the subscription box business started off small and snowballed gradually whilst the hardest business to get off the ground was my third business. This time however I had “thousands” of pounds to invest. I’d always held the misconception that having seed money would mean bigger, better, faster success, but this wasn’t the case. On reflection, I could see that this was part of the problem. Having cash to burn was inhibiting to starting a new business and here’s why.

I had more to lose and agonised over making the wrong decisions

When you start a business from nothing, you have nothing to lose except the time you put in and with that comes a certain freedom from the risk of failure. When you put in time AND money, there’s a risk that you could be left with less than nothing or worse, owe money if your start up funds come from a loan. I found this debilitating in knowing what to do next, rather than “do what’s needed” on a shoe string.

I spent more time thinking about how to spend money than how to make money

This meant by thinking was headed in the wrong direction. It was a distraction from what would generate revenue quickly and how to develop a “minimal viable product”. Instead I was thinking about who and how much to pay for the services that I thought I needed when I didn’t yet know enough about my customers and market. Entertaining potential suppliers at the very early stages also meant that potential suppliers and partners were trying to sell me what they could fulfil, rather than what my market truly needed.

I wasted good time trying to be perfect rather than fluid and viable

Because I had cash to spend on suppliers and partners, there was a sense of needing to get it right first time and that in itself was disabling. I became afraid of making the wrong decisions and therefore didn’t always make any at all. Had I not had any cash at all, I would have tried low cost or free options on a trial and error basis, knowing that everything would evolve as the business matured anyway. Now I know that pragmatism trumps perfectionism every time when you are starting and growing a business.

I was less entrepreneurial and creative

When you have cash to pay and outsource others to help you, it stops your own mind from being exploratory and this process in itself is hugely rewarding and accelerating for business development in itself. It means that you question and challenge existing models and competitors and find different ways of doing things. This is really important if the market already has many players.

I spent too much time fulfilling a market that I hadn’t yet created.

I was working on hunches and assumptions and hadn’t dug deeply enough. I wasn’t fully investigating the problem or understanding why it existed. Had I let it fly, I would have spent a load of cash telling the world how I was going to provide a solution without understand the psyche behind it and creating assets and products that didn’t scratch the itch and would have eventually been left festering on a website or store room somewhere.

I applied for grants to make the cash I did have go further and would have wasted it

Fortunately, I was unsuccessful in my application. The rejection meant that I went back to the drawing board and not only did I realise that I could develop the product I wanted on a much leaner scale, I looked harder at it and made it simpler. As we know too well, simpler is usually always better. I’d also learned where I was going wrong in my application process. Had this not happened I could have wasted someone else’s cash as well as my own. On the plus side, the feedback process supported that an independent party believed that there was potential in my idea but that it was immature and under developed. Now, with the further research and understanding my next application was stronger and more likely to succeed.

So what’s the learning?

I’m a huge supporter of outsourcing and getting the right experts on board, but you must fundamentally have the best understanding, be the leader and a good communicator of the problem that you are trying to solve. I felt like I was upside down and not focused on the right things to prove that a market existed and was worth investing in. You increase the risk if you don’t fully embrace this and sometimes having someone else involved can dilute it.

There definitely comes a point when every business needs cash to grow but the start line isn’t it. So test your market & drum up the interest. Talk to people, tell them your ideas and importantly, listen to their objections before you invest in what you perceive to be the finished product and then provide that service or offer that product on a small level to prove the hypothesis and when that works, then scale.

Invest to outsource parts of the business and gain knowledge beyond your skill set when you can add greater value being elsewhere. Invest to install a process that create economies of scale. Invest to be more sophisticated in your tech and professionally polish your message. Invest to reach a greater audience in an area that duplicates where you’ve already had success.

And finally, remember that like apes to humans, businesses are evolutionary in their own right. Match risk and investment according to taste.