Just how much does it cost to build a business?

I have just started working with a new client.  They have a great idea for a new food product and quite a lot of background knowledge to support their thinking.  They have some good contacts within the food industry and in other associated areas such as sales and marketing.  The one thing they don’t have is a lot of investment or cash reserves to support the business in its infancy.

Many businesses that launch now seem to do so with some kind of investment package to see them through the initial pre launch and launch phases of the business.  But is this really a prerequisite to building a successful business? If you cannot secure £250,000 – that’s the amount of investment Innocent secured before they launched properly in the UK – can a business grow by simply selling a small number of units and reinvesting those returns into more produced units, which in term builds a bigger sales base?

I can see the attraction and security that a large pot of upfront capital can provide.  The ability to hire staff with the confidence that you can pay their salary, the ability to go to a customer with a properly costed marketing support programme which is granted in exchange for a listing, are just two examples.  However, surely there is a benefit of growing incrementally and at a slower pace.  The business is perhaps likely to be more in tune with its customers, listening and learning from every single one.  The business is perhaps much better at negotiating hard for the best price on materials.  Of even more value is the fact that the business will in time have a longer track record of business and custom which means it cannot be treated as a ‘fashion’ or ‘fad’ brand.  Finally businesses that start from scratch are more incentivised to have robust profitable business models and per pound spent perhaps a better asset value to costs incurred ratio.

Clearly there are benefits to working with either model.  I am looking forward to getting stuck in with this new team and this new business.  It won’t be easy starting from scratch, and we will often wish we had a little more cash, of that I am sure.  But on the other hand, if we are creative in how we do things and think innovatively about how to execute our ideas, I think we could have a great story on our hands!!  So Watch This Space!!!