Imagine there was a genie who could tell you with 100% percent certainty whether or not your business startup/idea will become successful or not - he would say either 'yes' or 'no', but not explain why. The catch is that you would have to pay a huge amount of money for that information (say, two years worth of operating expenses upfront).
Would you pay up, or take your chances?
When I first thought about this problem, the answer seemed pretty clear cut to me. I would pay the ransom and find out. But after thinking about it a bit longer, the answer doesn't seem so straight forward.
Why pay to know the future?
Consider the scenario in which John and Pete start competing delivery companies in their hometown.
Both have exactly the same starting conditions, but John decides to save money and spend time putting everything together himself. Pete decides to risk money paying to have things done for him in order to save time.
While John benefits by picking up plenty of new skills and learning a lot about starting a business, Pete actually gets to market faster. Because Pete gets to market quickly, he is able to start generating a revenue stream and spends more time and more time on marketing and increasing sales.
By the time John is ready to launch, Pete is already well established with lots of loyal customers. He might not know how to do everything himself, but he can rely on other service providers to handle non-core aspects of the business.
The real world is a lot like this scenario. Moving quickly is really important - especially in the technology and online sectors. Finding a quick path to profitability is arguably the most important aspect of any startup's business plan.
If John knew (right from the start) he was going to get beaten and ultimately fail, he could have avoided wasting time and effort, and focused on a starting a different company instead.
Can we therefore state with certainty, "when starting a business, it's better to risk money than to waste time"?
I'm not sure this dilemma is quite so easily solved...
Skills vs. time vs. risk
Let's consider a more specific scenario in which you agree to pay the exorbitant cost demanded by the genie, who tells you that the startup will fail. That's a valuable piece of information, because now you can avoid wasting a year or two discovering that outcome for yourself.
But what happens if you decide to go back to the genie with your next business idea, and the outcome is the same? Well, that's still useful because now you have saved up to four years of time, but paid up to four years in cash (which might well mean you are now in debt).
The next attempt might yield the same result. This could go on and on...
At some point you would have to start wondering whether the problem is with you, and not necessarily the ideas. Maybe the idea is fine, but there is a problem with your approach. After all, the genie only says yes or no, not why the business will fail.
If you only ever pay to know the future, you will never build up the knowledge and skills required to take an idea and turn it into a success. And so, going to the genie without investing any time in a business, may end up increasing the chances of always getting a 'fail' response.
After all, almost every successful entrepreneur will tell you they learned their most valuable lessons from failures. Without learning the lessons they did, they wouldn't have the skills required to succeed.
Looking at it this way kind of puts as back to square one, because we can't be sure why our ideas are failing without actually spending time failing.
Startup dilemma takeaways
For my money, risking cash (no matter how tight the budget) to save time is always a smart move. There are always going to be great new tools and services that cost a bit of cash, but free you up to focus on more important things.
But, risking cash setting up a new venture isn't enough. You have to find a way to reach an outcome early on (obviously, you hope for a positive one, but a failure is just as valuable if it teaches you lessons that bring you closer to success).
A friend of mine won the right to set up stores for an international brand locally. He decided to set up his first store in the country's premium shopping mall. This was a huge risk because of the costs involved.
When I asked him why he jumped into the deep end, when he could have chosen a cheaper location to get started, his answer was:
"I can spend a year or two setting up smaller locations. But whether we succeed or fail really comes down to how we perform in the major locations. So why wait?"
Another decided to invest a sizeable chunk of their startup funds in order to exhibit at one of our big international conventions 8 months after they started. When I asked them why they were taking on this huge burden on top of all the work that goes with starting up, their answer was that the exhibition gave them solid targets to hit (in terms of getting their product range developed), it would provide them with an opportunity to market and launch their business, and it would also give them invaluable feedback on whether people liked their work.
No matter whether people liked them or not, they would be in a better position to make decisions about the future of the company.
I guess, for me, the answer to this dilemma lies in getting to the 'genie' moment quickly. Get your business up and running, and find a way to get an answer as quickly as possible (if it is possible to do so).
What do you think about how to balance time and cost when tackling a new venture? Share your tips and advice in the comments.