Written by Edward Radonic,
with inspiration from Duarte_biz_Gouveia and his Tik Tok Audio Video
Starting a business is one of the most exciting challenges an entrepreneur can take on. But for all the passion and big ideas that fuel startups, the harsh reality is that most startup businesses fail. And the surprising truth? Most of them don’t fail because the idea was flawed or the product wasn’t good.
They fail because they run out of time and money before they can truly take off.
The 1/3 Rule: A Success plan for Financial Survival, and a thriving business, it's Simple yet powerful.
This is where the 1/3 Rule comes into play. With over my 28 years of marketing experience and nine start-ups myself, I’ve seen countless businesses thrive when they follow this simple principle. And for those who ignore it? The road is often far rockier.
When starting a business, spend no more than one-third of your total available investment on the initial setup.
This leaves you with two-thirds of your budget intact, which is critical for two key reasons:
1. You’ll have the cash flow to give your business the time it needs to succeed.
2. You’ll have the resources for marketing your product or service effectively.
The Importance of Cash Flow and Time
Many entrepreneurs launch their businesses believing success will come quickly—customers will love the product, sales will pour in, and the break-even point will arrive immediately or within a few months.
The reality? Most businesses take much longer to stabilize and grow. It can take a year—or more—to truly understand your market, refine your offerings, and build a reliable customer base.
If you’ve spent the bulk of your budget on launching the business, you risk running out of cash before the market has a chance to respond. Without financial breathing room, you’ll be unable to pivot, adjust, or wait for your business to gain momentum.
That’s why I recommend reserving at least one year of operating expenses to support your business post-launch. This cushion gives you the time to learn from real-world feedback, adapt to challenges, and make smarter decisions as you grow.
Marketing: The Lifeline of Your Startup
Time alone won’t make your business successful—you also need customers. And the only way to attract them is through effective marketing.
Here’s where many startups stumble: They pour all their money into developing the product, setting up a storefront, or designing a website. By the time they launch, there’s nothing left for marketing.
This is a fatal mistake. Without a solid, sustained marketing plan, even the best product in the world won’t reach its audience.
Marketing isn’t a one-time expense—it’s an ongoing investment. It requires time, testing, and the flexibility to adjust based on what works. For example:
• You may find that one lead generation method outperforms others.
• You might discover that certain marketing channels don’t resonate with your target audience.
• You’ll likely need to refine your messaging or offers based on customer feedback.
This learning process takes time, but more importantly, it takes money. Without a marketing budget, your business will struggle to generate sales or build momentum.
Why Marketing Fails Without the 1/3 Rule
Let’s say you spend 80% of your budget on setting up the business and leave only 20% for everything else.
Here’s what typically happens:
• Limited Initial Reach: You launch but don’t have the funds for a robust marketing push, so few people hear about your product.
• No Flexibility: When initial campaigns underperform (and they often do), you don’t have the budget to test alternatives.
• Missed Opportunities: Even if customers show interest, you lack the resources to capitalize on trends or refine your strategy.
The result? A great product with no audience—and no path to profitability.
By following the 1/3 Rule, you’ll have the budget to invest in a long-term marketing strategy that evolves alongside your business.
Building a Marketing Plan that works.
A successful marketing plan should include multiple lead generation methods. Why? Because not every strategy will work as expected.
Some campaigns will exceed expectations, while others will fall flat. With multiple methods, you can identify what works best for your audience and double down on those strategies.
For example:
• Social media ads might drive more engagement than email campaigns.
• Referral programs could outperform direct mail efforts.
• Your audience might respond better to video content than written blogs.
Marketing is a process of discovery, and the only way to navigate it is to have the resources to test, analyze, and optimize.
Putting It All Together
The 1/3 Rule is more than just a budgeting guideline—it’s a framework for giving your business the time and tools it needs to thrive.
1. Spend no more than one-third of your total investment on the initial launch. This ensures you have funds left for unexpected costs, ongoing marketing, and operating expenses.
2. Reserve at least one year of operating cash. This allows your business the time to stabilize, learn, and grow.
3. Allocate a significant portion of your budget to marketing. During your launch and first year, consider investing 1/3 of the overall startup budget into marketing, following the 1/3 rule. This ensures your product or service can reach the right audience, and that you can refine your strategy based on real-world results.
The Bottom Line
Starting a business is an exciting venture, but it’s also a marathon—not a sprint. The 1/3 Rule helps you pace yourself, ensuring you don’t burn through your resources too quickly.
By leaving room in your budget for marketing and cash flow for your first year, you’ll not only survive the challenges of the early days—you’ll set your business up for long-term success.
Remember: A great idea is just the beginning. With time, marketing, and smart financial planning, you can turn that idea into a thriving business.
We can help guide you through the process. Included with all our plans is a marketing strategy consultation session. We provide all the marketing tools to manage your own marketing cost effectively.