Too Much Money

Perhaps someone somewhere determined that entrepreneurs and teenage girls have something in common: the desire to spend money. Think about it: Getting a little allowance upfront immediately turns into movies with friends, dinners out, and yes, I did need that trendy handbag. For entrepreneurs it can be trips to trade shows, upgrades to first class, and yes, I needed that ergonomic desk chair that costs $2,000.

Perhaps it isn’t exactly the same, but we all know that we’re not the best savers out there, so getting more money early can get an entrepreneur in trouble. When you have money, there’s this temptation to grow. And sometimes you grow too soon.

With growth comes fixed costs, and it is incredibly important to determine how to spend any additional money coming in. What is the opportunity cost when spending money on something fixed (fancy chair) as opposed to something variable? Do you get a return on the fancy chair? Does it really make you so much more productive? Or do you actually work from Starbucks most of the time?

There are some things out there that can help entrepreneurs get going without the temptation to spend money. Coworking is a great example. There are often neutral places (and yes, we even have them in Blacksburg), where like-minded entrepreneurial individuals can pull up a chair, connect to the wireless, and work. If they have questions or just want an outside opinion, they can glance up and see what the entrepreneur across the table is doing. Often these coworking arrangements also have strong social media followings, further connecting you into a network you may not have had.

No, there may be no fancy chair. But you could just happen to tap into a potential brain trust or new idea. Even if you aren’t starting a company right now, it is often exciting to hear what other people are working on.

Getting money too soon may keep you from experiencing these kinds of opportunities because you get focused on your resources. If you put a limit on your startup allowance, you could find that other people have tons of resources to offer you. But you have to put the money away to do it.

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Category(s): Thought Leadership
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