Have you ever heard of a company called Two Tunics? Don’t worry, no one else has either. It was an idea I had that flopped. I was going to make and sell scarves made with ‘up-cycled’ fabric and give a portion of the profits to help women in India start their own sewing businesses. Very Tom’s Shoes-esque. As I began to make the scarves, I realized that I didn’t enjoy sitting at the sewing machine all day and that a scarf is not all that original. As with many ideas, this never really took off.
Now imagine if I had taken out a business loan to start this company, and invested in a bunch of equipment and materials. Then imagine I didn’t like what I was doing, or the product simply didn’t sell. I would be either stuck in the company with the bank as my boss, or I would go bankrupt.
Mark Cuban, billionaire investor and owner of the NBA Dallas Mavericks, once said “if you start a business and you take out a loan, you’re a moron.” That’s a little intense, but I think he is right. It is much less expensive to fail small, and it gives you a lot more room to grow.
If your product really is amazing, the customers will begin to pay for your growth and experience. And, you get to be the boss instead of the bank.