If you are an entrepreneur, you pride yourself on having the “can do attitude”, on being self-reliant, and incredibly resourceful. In essence, it means you can do a lot with very little and hack your way through everything.
But is it really true? Can you *really* hack your way through everything? One of the biggest misconceptions entrepreneurs have is that “they can do everything”. It would have been nice if that were true, but even Einstein, arguably the smartest person ever born, was not good at zoology, botany, and language.
Not only is it not possible for any one person to do everything, it is even less likely for that person to do everything well. And therein lies another big mistake most first-time entrepreneurs make when they try to save money everywhere they can and, as a result, don’t get the advice they desperately need to get to the next stage and hire cheap to plug any “emergency” gaps, thus creating even more problems.
The opportunity cost of not getting the right advice
Disagreements between co-founders are one of the most common reasons why startups fail. We are all friends at the beginning when we excitedly sign our commitment on a piece of napkin, and then we turn into each other’s worst enemies when things don’t go as expected.
Such disagreements are often exacerbated by the lack of proper legal foundation because founders tried to save money on legal costs. Of course this is a very typical example and everyone *theoretically* knows not to pretend to be a lawyer.
However, legal issues are just the most obvious ones. Most startup founders are product or technology experts and lack business, financial, sales, and marketing expertise, or the very foundation of what it takes to turn a product into a business.
Can one or even two people really learn four new professions in the span of 1-2 years (a typical pre-funding journey)?
At the extreme, the opportunity cost of not getting the right advice is your business failing because you will run out of time and money trying to hack your way through, trying this thing or that, without a clear strategy or understanding why your previous strategy did not work.
The opportunity cost of hiring cheap
The same thing may happen if you hire cheap, because again you will not get the advice you desperately need (since you’ve already decided to pay for it) and most likely end up spending even more time completing a certain task because it would be done wrong or incompetently.
The opportunity cost of not spending your time wisely
The most egregious and overlooked opportunity cost is your own time, time that you could spend applying your talents building the business you dreamed of, making your vision a reality. Instead you are spending that time learning the things that may take years to learn and which you may lack skills to do anyway.
Is this a wise decision?
I urge every entrepreneur to calculate the real opportunity cost for them of not getting the help they need when they consider not only the cost of that service, but also the cost of their time of trying to do that yourself and the cost of bad interim decisions for their business.
Of course, this does not mean that one should go and spend thousands of dollars on every consultant. But it does mean that one should conduct an honest assessment of what their business needs and what the current team can provide and be ready to pay for expert advice to fill the gaps.
Yes, it is a risk, but so is starting a new company, and given the 95% startup failure rate, the risk of hiring someone who can help you not become a statistic is much less, while the reward is much greater.
In conclusion, know what you know, what you don’t know and take charge of your fundraising journey. Don’t be cheap, be smart.
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