Every start-up requires sweat equity or real equity.
Starting a business takes time. A lot of time. Entrepreneurs have known for a long time that starting a brick-and-mortar business requires money. Depending on the business concept, it may take a lot of money. If you’re a chef, and you start a restaurant, you can develop the menu, find the food suppliers, and staff the kitchen. That’s sweat equity - doing things you know how to do yourself. You will have to hire people to design your logo and menu, set up your P.O.P. and phone systems, find a building, decorate the restaurant’s interior, etc. These activities take real equity - cash. Plus, there are many material goods that must be purchased - also with real equity.
For some entrepreneurs, creating a web- or app-based business seems attractive because (they think) they can avoid the need for equity. They say, “Look at Facebook, Foursquare, or even Google. These are hugely successful businesses today, but they launched with no equity.” Well, that’s not quite right.
Let’s look at Facebook. It required almost no real equity to develop the initial proof-of-concept, but it did require a massive amount of sweat equity. Mark Zuckerberg wrote and re-wrote code for years creating iterations of Facebook before it attracted enough attention to start generating revenue.
Here’s a problem we see occasionally. An entrepreneur wants to start a virtual business on sweat equity only, just like Facebook. They tell us, “I’m not afraid of working hard and long hours.” The problem is: they don’t have the skills to invest sweat equity. They may have a good idea, but they can’t design, code, or produce their idea. The shine on their idea begins to tarnish when they see an estimate for how much real equity they need to do all the things they can’t do themselves.
If you find yourself at this crossroads, choose your vendors carefully. If your idea is complex, and you don't have the skills to do any part, you will probably need a team to get you what you need to succeed. Looking for a bargain will sabotage your project, your business, and your future.
If you have a business idea that has the potential to turn a profit, go for it. If you have the skills to burn sweat equity, great! If not, find the real equity needed to pay the right people to get your business off the ground. Your wisest investment will be to involve business experts who can demonstrate past successes.
Dialogs Professional Services has been consulting about virtual business activities for over 15 years. We understand how to feed your business.