2018 — For start-ups and entrepreneurs, having lots of money in the beginning is not always the key to success. Rather, qualities like persistence, a burning desire to succeed, discipline, and creativity are just as important. Doing a lot with very little, or bootstrapping, is key, as is pointed out by the fashion mogul Daymond John in his book: “The Power of Broke: How Empty Pockets, A Tight Budget, and a Hunger for Success Can Become Your Greatest Competitive Advantage.”
Instead of crafting elaborate business plans or searching for that one-in-a-million investor, one should focus on proof of concept, “in the field” market research, and leveraging past skills and experience as the keys to success. As Daymond John points out, not every entrepreneur, even with the best ideas, has access to traditional means of startup capital like loans and investors.
The organic growth that comes with bootstrapping, John says, is also a competitive advantage. As John points out, companies flush with money often over-invest in marketing activities that lack the tenacity, creativity and straightforward persistence of the bootstrapping business. How many times have we heard of start-ups raising millions of dollars in venture capital, only to burn through it in less than a year as their business goes bust. It happens a lot. Inexperienced, young management thinks that they’ve made it already when they raise funds and have access to it. They hire too many people (maybe some friends and relatives), rent out plush office space in a high rent area, spend tons on fancy TV ad campaigns, then STILL go bust.
One thing I don’t think Mr. John explains enough is the fact that, as a small company, you have a built in competitive advantage over large corporations — small companies are nimble. They can react fast to changes in the market, and retool if they have to, pivot, and shift gears. The large companies can’t do that. Especially if they are publicly owned, they analyze metrics to death, have meetings, think about it for months, hire a consulting firm, then run it through a committee to get funding. It could be 6-12 months or longer before they actually roll out a new product or service. In the process, they may miss out on a big part of the high growth curve. Large companies are famous for jumping into a new market only after the concept has been proven by more innovative small competitors.
Small start-ups have the luxury of thinking “outside the box”. Big companies don’t do that. As a small company, you can experiment, and test, and do it often, without risking lots of money. Your time and effort are your main resources.
Recommendation: Get the book ($5 or less as an e-book on Amazon). Read it. Live it. Apply it! It’s an easy read and it uses real world business examples.
Daymond John, of Shark Tank fame, founder of the multi-billion clothing brand FUBU, is a fashion mogul, entrepreneur, author, investor and motivational speaker. John developed his entrepreneurial spirit while working full-time and going to high school. He later managed a commuter van service then developed an iconic fashion label out of home-sewn clothes.
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