As is the case with all things entrepreneurial, there is not necessarily an exactly right or wrong time to begin a business. However, that decision should be influenced based upon various factors that can affect the viability of the venture.
For instance, Wasserman (2012) goes into detail about social and financial capital and how there are benefits and consequences of either waiting too long to establish the business, even while creating social and/or financial capital versus starting the company too early without capital in any form. This theory, which has been supported by research, implies there is something akin to a “sweet spot” in in between taking the time to establish social and financial capital while still starting early enough to avoid the various types of “handcuffs” that can hold a potential founder back from pursuing their business venture.
Grichnik, Brinchmann, Singh, and Manigart (2014) have researched the concept of bootstrapping, typically defined as starting a company with very little in the way of social and financial capital, and liken it more to an additional type of resource that newly established business can utilize during the critical early stages. Additionally, their research also suggests that bootstrapping is not always a default choice for those who begin their companies without other means of capital but that some entrepreneurs choose to establish their company utilizing bootstrapping methods as a way of avoiding market-based resources and establishing higher levels of independence.
Interestingly, Grichnik et al. (2014) found that bootstrapping entrepreneurs preferred not to draw upon close social ties for resources. Given Wasserman’s (2012) explanation that some new founders use friends and/or relatives to help fund their startups, choosing bootstrapping methods may be preferable to some who either do not have close ties for such resources, their close ties do not have the resources they need, or they simply choose to avoid using their interpersonal resources for their business venture.
Yet, while these bootstrapping entrepreneurs may be able to succeed in some cases and the idea of not having to wait until social or financial capital is sufficiently built up before launching a business may seem appealing, there are drawbacks that could possibly lead to business failure if not taken seriously. For instance, if a founder is having to continue working in their day-to-day job while trying to establish their company, their personal resources and energy will be drained, leaving little left for the exhausting task of launching a startup. Yet, even if a founder is able to leave their salaried position to allow time to launch their company, if there is little in the way of social capital, forging important relationships within the industry in a timely enough manner to help the company can be next to impossible.
For instance, anyone seeking to start a business within the equine industry cannot just decide to create the business and assume they have the necessary resources. Valuable relationships with farriers and veterinarians must be made in order to ensure that the horses remain healthy, thus securing the viability of the company. Even more helpful are contacts throughout the industry that can help spread the name of the business and act as a positive force within a subset of society that unfortunately involves more deception than is desirable. Within the equine industry, network connections that can back the company up as reputable and honest is equally important to financial capital.
In closing, while research has been done suggesting that entrepreneurs can use bootstrapping methods as an alternative to taking the necessary time for social, financial, and human capital, a startup has a much higher likelihood of becoming successful if the necessary capital is established prior to taking the “leap” and launching the business. Yet, as Wasserman (2012) points out, any potential founder must find the right time to start their business after establishing the capital they need, as waiting too long can be just as deadly to a company as starting too soon.
Grichnik, D., Brinckmann, J., Singh, L., & Manigart, S. (2014). Beyond environmental scarcity: Human and social capital as driving forces of bootstrapping activities. Journal of Business Venturing, 29, 310-326.
Wasserman, N. (2012). The founder’s dilemmas: Anticipating and avoiding the pitfalls that can sink a startup. Princeton, NJ: Princeton University Press.