When Underfinancing and Undercapitalization is Good
There have been a number of studies that say one of the reasons that new businesses fail is they are underfinanced or undercapitalized. While there is some truth to that, there is a whole other side of the issue that is very powerful to successful business owners.
But first let me say concerning companies that are flush with money from the beginning: It is just as dangerous for them as those without much money. The reason why is they simply throw away all semblance of fiscal responsibility and go through the money because it's there.
Yet there is still a more important reason why too much money can be bad. Walton said it like this: "Many of our best opportunities were created out of necessity. The things that we were forced to learn and do, because we started out underfinanced and undercapitalized ..."
That is an excellent assessment of the overall situation for businesses, no matter what stage they're at.
