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You Don’t Need Money to Make Money

Money won’t create success, the freedom to make it will.
—Nelson Mandela, former president, South Africa

 

Nothing is more irritating than hearing one of the many generalizations that permeate the business world and corrupt the minds of new entrepreneurs. You’ve heard them. You may even deal in   these false aphorisms: “Follow your passion.” “Fake it ’til you make it.” “Entrepreneurs are born, not made.” However, perhaps the most damaging to new entrepreneurs is the following: “It takes money to make money.” No statement is more wrong or misleading.

I vividly remember when, where, and from whom I first heard this phrase. I was barely in my twenties and in downtown Atlanta, meeting with an accomplished entrepreneur who owned her own graphic design studio. I don’t remember the context of our conversation, but when she said those six words I was perplexed. I was more impressed with the phrasing itself than its validity. At that point, I had started my first three companies with hardly any money at all. What she said just didn’t make sense and certainly wasn’t applicable to me.

My first company, a website for college students, didn’t require much money at all. If anything, it demanded only my time and computer programming skills. During the first few years of the business, I only spent money on web hosting and a domain name, although it certainly wasn’t necessary. Those costs were about $30 monthly. My second company, which produced a web-based content management system, had similar, nominal costs. Finally, my third company, a magazine, didn’t require money at all. I simply came up with the idea and went out to sell it before it existed. For each business, I assumed that raising money was not even an option, and I am glad that I did. Had I heard that awful phrase, I may have delayed or killed my ventures, thinking that I had to raise money. Instead, I figured it out and, most importantly, attacked my goal with the resources I had.

Having access to start-up capital when you don’t need it can actually stunt your growth. What is intended to help can turn out to be quite harmful. For instance, you can burn through cash unnecessarily, buying products and services that you could otherwise figure out how to obtain free of charge. That money could be used to purchase more important things. I cringe when I see a young entrepreneur’s start-up costs include items like office supplies and computers when they are absolutely unnecessary. These individuals don’t have the right state of mind of seeking to save money whenever possible. Perhaps they heard and were influenced by the very phrase that I am attempting to refute.

Now that I have been in business for over a decade, I think the phrase—altered a little bit—can be applied to specific situations. I would rephrase it this way: “It often takes money to make a whole lot of money.” As I raise money for my next start-up, the reality of this interpretation is all too real. When you aim to execute a big idea fast, an infusion of cash is necessary in many cases. To illustrate, most people would agree that the idea of starting a nuclear power plant with no money is ludicrous. In this case, before you have actual revenue, you would have to spend a significant amount of money. Regardless, most entrepreneurs do not raise capital to start their business.

Don’t believe the hype about needing money to start a business. It’s deceiving, and if you believe it, you could be ruining or delaying the success of your own endeavor. People who repeat such generalizations are sometimes simply trying to sound wise and learned, or they are trying to justify why they are broke.

Having no money doesn’t mean you have no resources. You’ve got something, so get started on your new business—and without spending any money if you can.

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