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.
There's nothing better than a little lack of capital to make people within a company look for answers; whether it's a sole proprietorship, of a division of a huge company. Too much capital gets people lethargic and lazy. On the other hand necessity gets the creative juices flowing and all sorts of creative answers start to flow when they are looked for.
Wal-Mart (WMT) and other great companies have this as a common denominator that they all had times in various stages of their growth where capital wasn't available as an answer. The result was the great ideas and innovation that came about for that very reason.
Sometimes in our businesses we might be throwing too much capital around, and by doing it, losing out on a lot of fantastic ideas because we don't need to look for answers. Even when we are flush with capital at times, I think it's an excellent idea to keep people hungry enough to find out answers to their challenges. Throwing money at challenges many times are simply short-term fixes to long-term problems.
Other Walton Sources:
The Most Underrated CEO Ever The legendary Sam Walton
Sam Walton: The Power of Persistence
Sam Walton Business Quotes for Ya
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