23 Main Pros and Cons of Low Capital Startup

There have been times in most of our lives when we had thought of breaking away from the shackles of doing a job for someone and venture into the world of business where we would be able to do things according to our plans and control everything about it.

But then we put away the wish mostly due to the lack of financial aid. It is a conception that startups cannot succeed without major capital investment or financial backing. It might be hard to carry out the plan but it is possible to establish a successful business with low capital.

Benefits of low capital startupDrawbacks of low capital startup
Gain knowledge on the subjectNo helping hand
Develop everything depending on personal expertiseExtreme time commitment
Grassroot marketing goes a long wayRisk involved
Using company credit to update businessLiability
Little or no debt involvedExternal factors will affect business
Building brand by oneselfMight bring stress in personal life
Using resources to the fullestHealth might be harmed
Dedication brings success
Sense of achievement

ADVANTAGES OF LOW CAPITAL STARTUP:

  • Gain knowledge on the subject:

Low capital startups focus on cutting costs wherever and whenever possible. The jobs that would have been done by experts in the field in case of a high capital startup needs to be done by self. Therefore, before venturing into the world of business, one needs to have all the knowledge possible on the subject so that he can manage every aspect of the business equally. This knowledge will help them later in the business.

  • Develop everything based on personal expertise:

A person should venture into this world of business after having enough knowledge about the subject. After that, the person can develop everything based on their personal expertise and knowledge. They will be aware of everything going on with the business and will be in a position to control it easily as they are the one who set it up in the first place.

  • Grassroot marketing goes a long way:

With low capital startups, there is not enough money to spend on marketing and advertisements. In this case, the business owner himself has to spread the word about his business and depend on word of mouth as a mode of advertisement. They can go around telling their acquaintances about the business. This method of grassroot marketing can take the business a long way as the people who know you personally and want you to succeed will consider it their duty to spread the word.

  • Using company credit to update business:

Such startups start out with minimal things and the owner can install more things and update the business according to the success of the company. He can depend on his own company to upgrade his business, make it more approachable and hire employees. This will make the business self-sufficient.

  • Little or no debt involved:

There is very low financial aid to support the company and the company’s credit is used to upgrade the company policies. This might appear to be a disadvantage at first but there is also a bright side to it. The owner is not indebted to anyone which is often a stress for the people who take loans to start a business.

  • Building brand by oneself:

Doing everything by oneself makes the owner of the startup very entwined with his company and he becomes synonymous with the brand of the company. This personal attachment of the owner with the company helps the business to grow as he builds the brand of his company by himself.

  • Using resources to the fullest:

Low financial backing in a startup will ensure that all the available resources are utilized to their fullest unlike companies with huge financial backings where the all the resources might not b used to their full potential. This efficient usage of resources is very important for any business.

  • Dedication brings success:

Immense dedication and endless hard work of the owner will guarantee that the startup succeeds and the company keeps rolling. Low capital will not affect the business if there is utmost dedication.

  • Sense of achievement:

Once the startup sets itself on the path of success, the owner will have a sense of achievement which will heighten his confidence. This will help him take bigger steps for his company.

DISADVANTAGES OF LOW CAPITAL STARTUP

  • No helping hand:

One of the main disadvantages of low capital startup is that there are no helping hands. The is not enough capital to hire people. The owner has to do everything by himself which is not always possible.

  • Extreme time commitment:

As there are no helping hands available in case of a low capital startup and the owner needs to do everything by himself, there needs to be extreme commitment on his part as for time. Everyone might not have the mental tenacity to work for most hours of the day.

  • Risk involved:

Like every other business and startup, there is risk involved even in case of low capital startup. It might be hard for some people to take the leap of faith instead of opting for a steady income.

  • Liability:

The only person who is liable for anything that happens to the company, is the owner. He is the one who will reap the fruits of success as well as bear the pain of failure.

  • External factors will affect business:

Dedication and hard work obviously bring success but there are various external factors like economy that determines the fate of a business.

  • Might bring stress in personal life:

The extreme amount of time that one has to dedicate for a low capital startup might exhaust a person and strain his personal relationships.

  • Health might be harmed:

Overworking might harm a person in various ways. It might stress them and affect their mental health and, in some cases, even affect their physical health.

There will always be risk involved in a business but if one really wants to start his own company, then he should not consider low capital as a hindrance.

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