Over Investing Early Can Be Big Time Failure
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@scottalanmiller said in Over Investing Early Can Be Big Time Failure:
So the rule of thumb is, keep it very small today just meeting your current needs. If the business grows, grow the infrastructure tomorrow.
That's been my rule of thumb. Vendors try and encourage you to over spec because extra capacity equals extra dollars for them.
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@dafyre said in Over Investing Early Can Be Big Time Failure:
@scottalanmiller said in Over Investing Early Can Be Big Time Failure:
@dafyre said in Over Investing Early Can Be Big Time Failure:
By saying "Over Investing" here, are you talking about cost... or "Over Building" with the assumption that if we build it, they will come?
They are one and the same, here. Overbuilding a year or two before it is needed is over investing. Investing poorly so that money is lost compared to buying what is needed today and buying later what is needed tomorrow.
That is not necessarily always going to be the case... For instance, in looking at some stuff, I see that I can build a NAS with 16TB usable cheaper than I can build a NAS with 12 TB usable.
All other considerations being equal, why should I spend more money and get less? I see that as Over Building, but not Over Investing.
[I'm just using this as an example]
That's not overbuilding, though.
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@IRJ said in Over Investing Early Can Be Big Time Failure:
Here is the problem from a business standpoint. New businesses are rarely profitable for the first 2 years. Even if the new business is growing, it may not be profitable yet. IMO you need to spec out a bit of growth in the beginning until you get to the point where the business is profitable.
That's actually a strong example of where overbuilding is incredibly dangerous. Making a company without any money spend what little capital they can get their hands on for growth that might never happen is the worst case scenario for this. In fact, that overspending up front might end up being what keeps them from making it in the long run.
When a company is starting up and money is at its tightest is the worst time to invest both because the "cost to you" and time value of the money hit you the hardest, but also because you know the least about the potential growth of the company.
At no time is it more important to keep things lean and spend only what is needed to give the company the best possible chance at needing more later.
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Nice response. There is also the notion that the business could pivot as the market changes, and the business needs to adapt, and whatever you invested in initially might be completely upside down from where you end up.
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Interesting convo. I can't get into too much detail but in the solar industry it is ESSENTIAL to have the investors lined up. If you don't, you die.
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@Son-of-Jor-El said in Over Investing Early Can Be Big Time Failure:
Interesting convo. I can't get into too much detail but in the solar industry it is ESSENTIAL to have the investors lined up. If you don't, you die.
Having a plan to scale, and having money ready to do so is one thing. Overspending and hoping you scale is another... that one is the dangerous gamble.
I can drive a monster truck to work because I might need the extra horse power, chassis clearance (maybe there is a flood... we live below a dam and if it breaks we'll be flooded), or because I can get home much faster by just driving over the top of everyone. But it's just unnecessary.
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@BBigford Understand. In this industry, materials are actually secondary to the investors lined up, as odd as that may sound.
66% of solar companies died in the past 5 years. A lot of it was due to not having the money lined up. It's quite sad...these are real people losing their jobs.
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@Son-of-Jor-El said in Over Investing Early Can Be Big Time Failure:
@BBigford Understand. In this industry, materials are actually secondary to the investors lined up, as odd as that may sound.
66% of solar companies died in the past 5 years. A lot of it was due to not having the money lined up. It's quite sad...these are real people losing their jobs.
Yeah that's too bad. You have to remember though that a lot of investments are based on those VCs having investments flowing in. If one of their investments doesn't yield a return, it could be cataclysmic all the way down the chain.
On the other side, it's not a new technology but it's starting to get a lot more traction but still fluctuates with support. So big investments have to yield big returns, often those VCs will pull funding at the last minute and the entire project collapses. Risky business to be in.
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@BBigford Big time risky. In particular the Chinese market. So funny to see the price of materials going down so far and the price of electricity going up, and yet Chinese solar companies are not growing.
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@Son-of-Jor-El said in Over Investing Early Can Be Big Time Failure:
@BBigford Big time risky. In particular the Chinese market. So funny to see the price of materials going down so far and the price of electricity going up, and yet Chinese solar companies are not growing.
Fossil fuels and other kinds of power producing entities will continue to rise until they are far unaffordable. They are consistent and investors see the return, so they will milk those products dry.
Nobody wants to be the first line of investors, they just want to see a hefty return.
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@BBigford That is true!! They just want to protect their bottom line!! LOL
Solar actually has the biggest profit involved since it is cheap to set up the infrastructure (relatively speaking). Sill sits around 11% of the market.
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@BBigford said in Over Investing Early Can Be Big Time Failure:
Nice response. There is also the notion that the business could pivot as the market changes, and the business needs to adapt, and whatever you invested in initially might be completely upside down from where you end up.
Right, and this can happen from either side.... either your business might go in a new direction, shrink, fail or grow in a way that doesn't require what you invested in. OR the product market might change. Maybe you need to move to hosted solutions, new technologies replace what you had been using or prices drop dramatically.
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@Son-of-Jor-El said in Over Investing Early Can Be Big Time Failure:
Interesting convo. I can't get into too much detail but in the solar industry it is ESSENTIAL to have the investors lined up. If you don't, you die.
Even with them lined up, you still want to spend money wisely.
