The Challenge
One of the biggest challenges all start-up businesses face is learning when and how much to invest. Investing in your business is like watering a plant. Not watering enough may kill the plant; however, watering too much may also hurt the plant. In the same way, your business might fail because it lacks investment, or it can fail because you invested too much, too early.
Do not Invest Too Much, Too Early!
Funding your entire business by taking out loans and debt is not a smart idea. At some point risking debt is worth it but not before you have some certainty that your business will succeed. In the beginning, there are many things that we can do for our business that do not involve outside monetary investment (loans, venture capitalist funding, and etc...). At first, I recommend that you focus on things such as a developing a marketing plan, researching your market, and scouting the competition. Also, in the beginning, do not wait until your business is "perfect" before you start chasing customers and earning money. One way of escaping debt is to earn income. Sounds simple enough, right? However, too many entrepreneurs buy fancy office furniture, new equipment, contract for monthly services, and even hire employees before they earn a penny from their business. Before you spend too much money on setting up the business, first test your idea and start making money as soon as possible!Build Your Portfolio and Earn Money
You are probably thinking that without a proper setup, who will want your services or products? Well, there is one strategy that always works: charge your customers a rate that is cheaper than everyone else. There are some customers who will always buy whatever is cheapest. I do not recommend that you stick with this strategy forever but for your first few customers, it is exactly what you should do. This approach is a good way of building a portfolio, getting testimonials, gaining experience, and earning money at the same time. Take the money you made and invest it back into the business. In the meantime, continue to perfect your services. The gradually, you can increase your rates as your expertise grows and so does your brand. Following these steps might mean that it will take you a little longer to reach your goals but it also guarantees that at worse, you will only lose money you didn't have before you started the business. If you invest too much of your personal money, or from loans, you might be stuck with debt that could ruin your personal life, not just your business. I preach taking risks but there is a difference between taking calculated risks and being stupid.Investing (at the Right Time) is the Key to Growth!
Do not interpret what you have read in this article as anti-investment. On the contrary, if you do not invest in your business, do not expect your business to grow. If you do not water a plant, do not expect the plant to grow. If you can't invest a $100 in yourself, do not expect to make $100,000.
The key to investing (in business, stock markets, or in life) is TIMING! So when is it the right time to invest? After you have worked with enough customers to have some certainty that your business has potential for success, then you can start investing. Customer feedback is a better sign than your friends and relatives telling you that your business is a great or horrible idea. If customers are buying what you are selling, then it make sense to continue investing in the business .
