You’ve probably heard the old cliche: You’ve got to spend money to make money. It’s obnoxious, but it does highlight a real problem that anyone setting out to start a business venture will likely encounter. Businesses are investments, and investments imply an allocation of money.
Or do they?
We put out our feelers and talked to business owners who say they started their companies without any substantial outlay of money. How did they do it? What advice would they give other broke entrepreneurs? Read on to find out.
Tip #1: Don’t Quit Your Day Job
At least not right away. You’ll probably need to rely on your current job to keep the lights on while your new business venture finds its feet. According to Jason Littrell of Jason Littrell Ltd.:
I started my business over ten years ago with absolutely no money. I didn’t even have an LLC for six months. The misconception that you need money to start a business really bothers me, so I wrote a book about it. The truth is you can start a business while you already have a job. In the COVID economy, it’s about taking a thorough inventory of your skills and building a business. The hardest part for most people is the sales and marketing part. Most people have a very troubled relationship with money, thus have a difficult time asking for it. You don’t even have to marry your niche, you can just date it for a while to see if it’s working for you. If not, simply change it.
Tip #2: The Type Of Business Matters
Not all businesses are the same when it comes to starting costs. Considerations such as the equipment needed to run your business, any required physical space, and inventory to stock all factor into how easy or difficult it is to bootstrap a new company. Keep in mind the non-financial resources you may possess from your current job or business; working with the resources you have will reduce your costs. The following three stories help illustrate this, starting with Andrew Cao of Motoza:
My business partner and I started Motoza, a digital marketing agency, back in 2011. We had no funding and bootstrapped it from the start of it; we put in about $200 each to fund our new venture.
It was tough in the beginning. Luckily, we worked from home, did not need staff, and did not need to purchase expensive physical equipment. We had some software already so the operational costs were at a minimum.
We had to dip into our savings for the first few months until we got a couple contracts signed to help bring in revenue. The cashflow was still not enough to cover full salaries, but at least we were making something by the end of our first year.
Next up, Ryan Snaadt of Snaadt Media Group:
I started my business in college with a $300 camera from Target â shooting small projects around campus. In less than 12 months, I made over $10,000. I then used the revenue to upgrade my gear, increase my production quality and price point â and grow my business.
The first few years were tough to overcome the ‘just a guy with a camera’ stigma. Then I started offering integrated marketing with the videos. Essentially shoot, edit, produce, and run the ads for clients on social media. This brought much more value to them and transcended the ‘guy with a camera’ stigma to reach more premium level clientele.
For a business today, there are many ‘lean’ ways to start up. Many times a service or consulting business can conduct their interactions over the internet and not require unnecessary overhead like office space, multiple employees, etc. In my world of marketing, it has never been easier to use free platforms like podcasting, YouTube, social media, and others to grow your audience and find more customers.
And from Julie Austin of Creative Innovation Group:
I’m an inventor and manufacturer of a product called swiggies, wrist water bottles for adults and kids. I literally started out with $5.00 and a clay prototype. No investors, no savings, and no experience in running a business, especially something as overwhelming as inventing and manufacturing a new product.
How difficult was it? Extremely! I worked 2 and 3 jobs for years to get patents, buy inventory, and get it off the ground.
How long did it take to become profitable? It took several years to show a profit. But I don’t think all businesses are this difficult to start with no money. It’s a very cash intensive startup.
Tip #3: Don’t Expect Immediate Windfalls
When you’re talking about starting a business without any money, you’re more likely looking at a slow ramp-up than instant gratification. Plan accordingly. While you may begin raking in money right away, your real payday may be months or even years away.
Neal Taparia of Solitaired shares some insights below:
It was very challenging to grow a business without financing. I lived off savings in the beginning, and paid myself just enough for living expenses for years. We became profitable 2.5 years into it, with the caveat I was paying myself minimally.
The biggest pro is it requires you to be disciplined. You count every dollar in and every dollar out, and you make sure everything is spent to best grow the business. If you have a bad hire, you won’t hesitate to make the necessary changes. On the flip side, it takes time. You don’t have outside capital to accelerate your growth. You have to be patient and disciplined to have the long game in mind.
Joan Igawa of Atomic Bullfrog Studios has this to say:
I am a small business owner and had started my t-shirt design business about 3 years ago. I did not use any type of money up front to start. I started on Merch by Amazon which requires no money to start an account, plus all the computers and design software I already had. The drawbacks to this was that it took a few months to start seeing any kind of profit, while toiling day and night creating, researching, and uploading designs. I had to learn how to strategically use keywords so customers could find my designs, as well as testing what was selling well, what was oversaturated, and what certain untapped niches had potential to become very profitable.
Tip #4: It Can Be A Good Way To Launch Companies That Investors Would Overlook
Don’t have a network of investors to hand you dump trucks full of treasure to start your company? That’s not always a bad thing. Investors are looking to win big on their investment, which means they can easily overlook niches that take time and love to develop, while ultimately generating a healthy income. From Meaghan Thomas of Pinch Spice Market:
My partner started our organic spice company, Pinch Spice Market, in 2011 with his former business partner. They started it with just their personal savings, and to this day it has never taken on a loan or received outside investment.
Personally financing the business was certainly the more difficult road to take, but it wasn’t without its perks. They were able to have full control over the product, which was really important to the founders. The company proudly sources spices fair and direct trade from certified organic farmers and co-ops around the world. It’s certainly not the cheapest way to acquire spices, but it is the most ethical way. (We also find it yields the highest quality spices too, as farmers don’t have to worry about living in poverty and can spend time tending to their organic crops, but that’s a whole different story.)
The bottom line with investors was we didn’t want to take on anyone who would just look at spreadsheets and decide it was cheaper to purchase lower quality spices from a standard spice conglomerate like the majority of our competitors do.
Tip #5: Take Advantage Of Free Platforms
The internet can be both a blessing and a curse for small businesses. On the one hand, it puts you in competition with people outside of your immediate geographic location. On the other, it offers you access to those other markets and often at little to no cost. Take advantage of platforms (such as Etsy, Amazon, etc.) to sell and market your products and services without spending too much money upfront. Below is a quote from Ryan Scribner of Scribner Media LLC and Investing Simple:
I have actually started two businesses with $0 in start up money. The first is my YouTube channel, which I started in 2016. The second is my blog, which I co-founded with my business partner in 2018. Since these are online businesses, it was obviously a lot easier to bootstrap it and start with nothing. In 2019, my YouTube channel surpassed $500,000 in revenue and the blog is on track to do around $150,000 in revenue in 2020. These businesses will bring in a combined $1,000,000 by 2021. It was not difficult to start these businesses without money. There was no inventory to purchase, and I simply utilized what I already had around me. I eventually upgraded equipment, but I simply reinvested my earnings back into improvements. To get started with a channel, all you really need is a camera and a computer. For a blog, just the computer will do. It is completely free to post your videos on YouTube or share blog articles on the internet.
Tip #6: Tap Unconventional Sources To Get Financing
You can work around not having much money, but there’s a good chance you’ll run into at least a cost or two early on. From benevolent relatives to personal loans, to crowdfunding platforms (such as Kickstarter), it’s possible to raise funds even if your accounts are empty. Just keep in mind that all of these unconventional sources come with their own drawbacks. You can strain relationships, accrue debt you can’t pay, or add overwhelming complexity or responsibilities to what otherwise would have been a simple business plan.
Note that this often goes against what conventional wisdom says is “the right way to start a business.” But you probably wouldn’t be doing this if you weren’t a risk-taker, would you? Just check out what Frank Chioda of Trivr Eats has to say on this:
We’ve bootstrapped the company so far: pouring our savings and resources into it and we’re very proud of it. I did something that I’m sure many people would advise against. At 29 years old, I emptied my 401(k). I pulled all $50,000 out and put everything into the business. It’s been incredibly difficult and costly, especially compared to many other startups that focus on OPM. Other People’s Money.
But I wouldn’t have it any other way. Savings, 401(k), it’s all just investments in different things and we decided that if we’re going to gamble on someone, I’d rather it be on us. We’ll find out soon enough whether we were right or not.
Tip #7: Be Prepared To Be A Jack-Of-All-Trades
While you may be able to outsource some work for favors or by offering sweat equity in your business to people who help you out, chances are you’re going to have to wear a lot of different hats as your business gets off the ground. You may not be an expert in web design, for example, but you still may have to design a functional one. You may not know much about finance, but you’re going to have to learn how to balance your budget. This isn’t a bad thing. While the salaried world tends to reward specialization, entrepreneurs benefit from a more generalized skill set. From Leigh Louey-Gung of Life Operating System:
I started LifeOS with no money from my bedroom and it forced me to have to learn how to do everything. I learned how to build websites, how to setup forums, how to write articles, how to develop coaching programs, how to do social media, and everything in between.
While it was a struggle and took far longer than it would have if I had money to hire skilled and experienced employees, the skills I learned through that process have put me in great stead to build my later companies and the experience of completing those tasks has given me the ability to hire staff more effectively as I now know what to look for.
Small Business Spotlight: LaTersa Blakely Enterprises, LLC
In 2009, administrative assistant LaTersa Blakely of Peachtree City, GA, realizing that all but $20 of her salary was paying for childcare, left her office job behind so that she could look after her children full time. With the need to stay home with her kids and no money to spend on a business venture, Blakely needed to get creative.
“I started my very first business in 2009, called LaTersa Diaper Cakes and, to be honest, I had no clue what I was doing,” says Blakely. “Because I still wanted to be able to contribute to the monthly household bills, I started selling my diaper cakes on eBay, Etsy, and craft shows. Because I started my business from my kitchen table and only purchased supplies as my orders came in, I was able to make a little money.”
Over time, Blakely sought additional sources of revenue for times when the sales of her diaper cakes were low. She now supplements her sales with digital products, such as ebooks, consulting, and courses. Ten years later, her business is thriving.
Blakely offers a few tips for people trying to bootstrap their businesses:
- Start With Digital Products: “It will only cost you time and effort upfront which will lead to residual income over time. Some examples would be printables, eBooks, workbooks, and consultations.”
- Offer Coaching Programs: “If you have knowledge that people are asking you constantly, you can package that and sell your knowledge. If you can solve someone’s problem, people will pay you to make their pain go away.”
- Host Virtual Workshops: “Collaborate and build relationships with other entrepreneurs and have Summits, classes, workshops all from the comfort of
- Get Creative: “When you are starting a business, you have to have more than a goal to make money because when you first start out, your money will not come in consistently. You have to have a BIGGER why than making money because if that’s your driving force, when you don’t see the money right away, you will give up. Start small and work your way up. The more creative you can get and keep your expenses low will help you build momentum while you’re building your business.”
Starting A Business With No Money: Have You Found Success?
Have you started your own business with no money? What obstacles and opportunities did you encounter? We’d love to hear about your experiences in the comments.
The post No Money? No Problem. How To Start A Small Business If You’re Short On Funds appeared first on Merchant Maverick.