There has been a ton of blogosphre buzz lately surrounding Guy Kawasaki and his launch of Truemors. Today Guy came out with a transparent ’by the numbers’ look at the Truemors production. Specifically, Guy seems very proud about only spending $12, 107.09 to build his new company.
However, I think a lot of people are missing a crucial point: it’s not what it costs to build, so much the length of the payback period that an entrepreneur should be concerned with. In this case, since Guy made a free website that will likely make a minimal amount of money on advertising, it was in his best interest to keep the costs as low as possible. Still, take away his personal name brand and a crappy is idea is still crap, no matter what it cost to build. Aside from making a case for his personal ability to attract attention and get people to help him out, I’m not sure what point is here? Should everyone launch a company, even if the idea is marginal at best simply because it can be done for so little money? I should think not!
For example an entrepreneur may spend $100,000 to design and code some specialty accounting software. But, if that entrepreneur has done his research and pre-vetted some potential clients willing to pay $50,000 a pop, well I would argue that the risk may be lower than a website that cost $12,000 but earns $50 a month in advertising. Factor in the risk to REWARD ratio and it’s even a larger gulf between the two concepts. An entrepreneur should really not consider the actual cost of development, but rather the payback and return. If the idea is good enough, you can get the money, especially in today’s economy.
Finally, another key point is that while you can launch a business for a miniscule cost upfront, you still need more money than that. In fact, it seems likely that the less you spend initially, the more you will shell out later ’“ see Guy’s Point 18 where he says it took just 3 hours before his site was hacked. No mention here of what that cost him in re-structuring and downtime!