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How to Start a Business With No Money

Updated on May 18th, 2022
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Have you ever dreamed of owning a business? I can’t blame you. The advantages, after all, are crystal clear. Mainly, you get to be your own boss, set your own hours, and make a living off of a passion.

Because of this, it’s not surprising that about three in five Americans (61 percent) have an idea for starting a business, and about a third (34 percent) have had more than one idea.

Despite this, it remains a dream to many due to funding constraints. In fact, according to Zapier, 63% of Americans haven’t followed through with starting a business due to a lack of funding.

To be fair, that’s a valid concern. After all, it costs money to start a business. And, if you’re already on a limited budget, this could further complicate matters.

There is some good news though. A business can be started, or even expanded, for free if you think strategically and utilize available resources.

Take advantage of what you have.

Let’s say that you love pizza. Who doesn’t? But, you’re such an avid pizza fan that you want to have your own pizzeria.

Even if you actually know how to make a mouthwatering pie that people would line up for, you need a lot of money upfront. Besides a physical location, you need key equipment like pizza ovens. Simply going the food truck route would also cost a pretty penny.

Another option? About taking your passion and knowledge and sharing it with others through a blog. Believe it or not, you can set up your own blog via Blogger or Medium. So, that means you’re only investing your time. And, eventually, when you get a following you can make money with ads and affiliate marketing.

That’s just a long way of saying that when starting a new business consider what you have at your fingertips.

  • What unique skills do you currently possess?
  • Do you have any past experience?
  • What areas are you knowledgeable in?
  • Identify your relationships with others, map out your network of contacts, and consider how your connections can assist you in using what you have to your advantage.
  • What are your resources and what can you access?

Consider what you have available in greater detail than what springs to mind immediately. And, you should also document your findings so that you take stock of what you already have and how that can assist you.

Focus on businesses that require little upfront capital.

After considering what you have at your disposal, are there any low-cost business ideas that correspond? Again, if you’re a pizza aficionado, then starting a blog is an obvious business idea that requires little capital upfront.

In fact, the number of businesses you can start today requires little or no money initially. Particularly, service-based businesses.

A service-based business is one in which you sell services as your primary product. Due to the fact that you won’t be selling products, you won’t need inventory, a shop to manufacture the goods, or a warehouse to store them.

Almost any service business can be started on a shoestring budget. Online businesses, especially, are well suited to this. Often, you need nothing more than a computer, an internet connection, and your time. Suggestions would be consulting, freelancing, or dropshipping.

There are also so offline ideas like dog walking or being an Airbnb host.

Vet your idea.

You’re probably going to put money into your idea eventually, even if you’re reinvesting the profits.

“Before you put money in your business, make sure you validate your idea within your trusted circle,” says Fahim Sheikh, owner of SaaS company Trellis. “Sometimes, we think we have a great idea, but when we explain it or pitch it to others, we often realize that the concept may be a tough sell.”

It’s important to ensure your idea has legs that will make it worth your time and ultimately earn you a profit despite the low startup costs.

Calculate essential business expenses.

It’s always a good idea to calculate your expected costs before you start a business with no money. Why? Because this will establish a savings goal so you have enough money to get started.

Shopify estimates that starting a business with zero employees normally costs $18,000, while up to four employees typically spend $60k during the first year of operation.

Shopify’s study included 300 business owners, and the following were the ways they funded their businesses;

  • 198 drew on personal savings
  • 90 reinvested revenue
  • 69 received support from friends and family
  • 63 obtained a personal loan

As such, the number one way to start a business is by bootstrapping, so you’ll most likely need some type of personal capital eventually. According to Shopify, businesses should aim to spend a certain percentage of their budget on the following various aspects of the business.

  • Operation: 10%–15%
  • Product: 28%–36%
  • Shipping: 8%–12%
  • Online: 9%–10%
  • Marketing: 7%–12%
  • Team: 14%–30

The good news is that your budget will only be about $1,500 per month for a year’s worth of operation.

Now, if you’re starting an online or service-based business, you can drastically reduce these expenses. Take operations, as an example. Instead of paying for Quicken you could use free alternatives like GnuCash.

Regardless, at some, you will have to invest in your business. So, it’s not a bad idea to get ahead a start with your savings.

Don’t quit your day job.

It’s cool to have a big idea. It’s even cooler to actually make that idea a reality. But, let’s be real here. Ideas don’t put food on the table.

It’s rarely a good idea to quit your day job and start a business that hasn’t been tested. Moreover, your chances of succeeding are better if you stay employed at your day job.

The reason? As you begin and build your business, it will be easier for you to take risks if you have a steady income. Although this may be difficult at first it will help you scale your business faster. Additionally, this gives you the freedom to pursue new opportunities.

Additionally, you can invest and grow your business faster with your income. You will also find transitioning from an employee into a business owner much easier once your business begins to thrive. In other words, you should build a solid foundation if you hope to achieve long-term success.

How long should you keep your day job? That depends. However, it’s suggested that wait until you have at least six months of expenses saved. It usually takes about six months before you begin to see any cash flow. So, if having this stashed away prevents you from living on credit or depleting your savings.

Invest only what you can afford to lose.

A golden rule of investing is to never invest money that you can’t afford to lose. And, that definitely also applies to starting a business.

You can maintain flexibility in the business by investing only what you can afford to lose. It also reduces stress and prevents overreaching. And, you may never launch your business because you’ll invest only when you expect a specific return.

As an example, let’s say that there’s a person who refuses to quit their well-paying job until they find one that pays more. In contrast, one might decide to invest a small amount of money and three years into a project that they’re passionate about — regardless of whether it will pay more than they’re making now.

Minimize your spending.

When starting a business with no money, lower your costs as much as possible.

You can start by taking these steps;

  • Work from home. A business that can be run from home requires less capital than a storefront, warehouse, or office.
  • Enact a spending freeze. Choose a length of time, whether a week, a month or six months, during which you do not purchase any products or services you do not need.
  • Use cheap or free services. WordPress or Wix are free services that allow you to build a basic website and market your business using Facebook or Instagram. For accounting and project management there’s Wave and Wrike respectively.
  • Get free or used equipment. You might be able to get a free computer, for instance, over at FreeCyle. Or, you can head over to EquipNet to scope out used office equipment or furniture.
  • Invest in only what’s essential. Deciphering wants from needs can be tricky. In general, if something is essential to your survival, then it counts as a need. For your business, this should be directly related to revenue generation, such as marketing and training.

Get in the trenches.

Who else is going to invest as much time, energy, and resources into your business as you? No one.

With that in mind, you’re going to have to put in the time and effort as a business owner. What’s more, you’re also going to have to wear multiple hats until you can afford to hire freelancers or employees.

You must do everything you can to build a solid base for your new business. Whether that’s learning new skills for free online, making cold calls, writing blog posts, engaging your audience on social media, or attending trade shows.

You will also make mistakes when you are in the trenches. In fact, mistake-making is an important element of setting up a new business. Making mistakes is the best way to find out what works and what doesn’t work for you or your business.

Having all the groundwork laid beforehand will also make onboarding new employees more convenient. Due to your firsthand experience of what it takes to succeed in your business, you will be able to guide your employees to success.

Find alternative funding sources.

Despite the fact that you may need little to no money to start a business, there is a good chance you will incur some expenses along the way, especially if you expand. Fortunately, you have several funding options available to you.

  • Friends and family. Prepare a business proposal to help you raise money if you know someone with enough capital to help fund your venture. Most importantly, you should set clear expectations about doing business with family or friends to avoid misunderstandings.
  • Credit cards. While they may be the easiest way to obtain short-term financing, they have some drawbacks as well. One drawback is that they are very expensive. Most cash advances come with high-interest rates. Cash advances are typically charged an upfront fee of between 3% and 5% with credit cards.
  • Business loans. Usually, a bank or alternative lender will make a business loan to a company. Small business loans come with high-interest rates, fees, and repayment terms, so do your research before applying for one. Generally, lenders consider your credit history, business history, annual revenue, and ability to pay back the loan when approving your loan.
  • Home equity loans and home equity lines of credit. If you have sufficient equity in your home and are a homeowner, this will be an option. However, the collateral for the loan is going to be your home. You’re still responsible for the equity loan or line of credit if your business fails.
  • Retirement plan loans. The IRS allows you to borrow up to 50% of your vested interest in your plan, or $50,000. But, you must continue working in order to receive the loan. You will need to repay the loan within 60 days if you leave your job to start your new business venture.
  • Business grants. Business grants are a form of free capital given to companies to help them expand. They come with a number of requirements and stipulations, though. The competition for business grants can be fierce as well. This means that you should only apply for grants that directly relate to your business, such as business grants for women or business grants for minorities.
  • Crowdfunding. Consider crowdfunding (raising money from many donors) if you don’t feel comfortable asking someone to help finance your business. It is possible to raise money through a donation, debt, reward, or equity crowdfunding campaign.

Frequently Asked Questions About Starting a Business With No Money

1. Do I have what it takes to start a business?

Even if you have an idea for a business, the best place to begin your planning process is to decide whether you have the skills required to start and operate a business

An objective assessment of your skills, abilities, and talents as well as an assessment of your strengths, weaknesses, and personal situation are necessary when determining whether you possess business acumen.

2. Can I really start a business for free?

Short answer; yes.

It is possible to start a low-cost business on a shoestring and scale it up later. It is not unusual for businesses to start small, working from home or online, then expand and hire more employees while finding a larger location.

3. What kind of business should I start?

If you’re unsure, you should start something in your area of expertise. You should view the start-up of any business as an investment in your own human potential. Although you could generate income for another company using your skills, you decided that opening a business will be a better option for you.

In the same way that you wouldn’t invest in stocks or other investment vehicles outside your comfort zone, you shouldn’t do that with your own strengths. If you choose a business in a category you already know a lot about, starting a business will be easier, even if it’s not always a seamless process.

4. How will I market my business?

Marketing your business will be easier if you know your target audience. B2B audiences may respond better to webinars and white papers, while younger audiences may benefit from social media.

Understanding where and how you will market your business is crucial before you start a business. Brands that have successfully communicated their value proposition have become world leaders. Defining your unique selling proposition and communicating it to the right people should be your marketing focus before you launch. Poor marketing can be fatal for new companies.

5. When can I expect my business to turn a profit?

Generally, it takes between six months and a year to reach profitability. Taking this into consideration, technological advancements and advances in communications have made it very easy to start your own business with almost no overhead, especially in a service-based economy. Here is where the importance of a business plan shines brightest, since a plan will allow you to project your profitability.

John Rampton

John Rampton

John Rampton is an entrepreneur and connector. When he was 23 years old, while attending the University of Utah, he was hurt in a construction accident. His leg was snapped in half. He was told by 13 doctors he would never walk again. Over the next 12 months, he had several surgeries, stem cell injections and learned how to walk again. During this time, he studied and mastered how to make money work for you, not against you. He has since taught thousands through books, courses and written over 5000 articles online about finance, entrepreneurship and productivity. He has been recognized as the Top Online Influencers in the World by Entrepreneur Magazine and Finance Expert by Time. He is the Founder and CEO of Due.

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