“Less is more.” It is a phrase often used and many tend not to believe it – especially when it comes to business. This lesson especially applies to small business entrepreneurs would be worried that they do not have enough capital to achieve their goals. When a company is operating on a tight budget, it will tend to have a lean cost structure and accordingly perform much better than a company that has received a lot of cash from venture capital firms.
When opening a new business it is important to realize that success is not absolutely dependent on funding. Skills and the quality of goods or services offered play a much more important role. Furthermore, a lack of capital resources can often lead to an entrepreneur developing creative and innovative ideas, thus creating a competitive advantage and success. And with success comes an increase in revenues and capital. Another reason why bringing too much money from outside sources is not always a good idea is that VCs can try to force rapid growth, often at an earlier stage than management believes is appropriate. A team focused on working towards best quality is essential, especially in an economy downturn. Perfection will lead to growth of the company in a competitive environment. Finally, outside money leads the founders to spend less time thinking about customer needs and more time thinking about pleasing the board of directors.