Small businesses are a vital part of the economy, and a big part of the American dream. Forbes states that approximately 543,000 new businesses start each month, more than half of them home-based. However, they also note that more businesses shut down each month than startup. One question that we’re frequently asked at Alliant Business Systems is how aspiring entrepreneurs can improve their odds, even — or especially — if they’re starting a business with no money.
Start With a Business Plan
Writing a business plan is a vital (if somewhat intimidating) first step. If you’ve followed the steps that go into assembling a solid business plan, you will have completed market research into potential clients and competitors, you’ll understand the markets in which you plan to operate, and you’ll also have a much clearer picture of the kind of financing you’ll need to get your business off the ground. You’ll revisit and revise it over the life of your business, especially since it’s one of the first things potential lenders and creditors look for.
Validate Your Ideas
There are two ways to bench-test your business idea. You can do these things separately, but doing both will give you a clearer picture of your idea’s viability.
One approach is to speak to people who know your market. These may be business mentors, other entrepreneurs, and even competitors who work outside your target area. Their perspective will help you gain perspective on your ideas and make them stronger.
The other approach is to test your idea on a small scale and at low expense. Running a pilot program can help you test the waters, while also getting feedback from clients that help you refine your offering.
Don’t Quit Your Day Job
This is the era of the side hustle. A business doesn’t need to be all-or-nothing. Many people start out running a business in their spare time while working full-time. This is considerably less stressful, since it involves lower overhead and fewer risks up front. If your business doesn’t pan out or turns out not to be what you had in mind, you’re not up the proverbial creek sans paddle.
Tap Your Network
No matter how good your idea, and how strong your skills, running a business calls on skills you may not have. Nearly any skill can be learned, but you may also reach a point where the time spent learning the basics of accounting, web design, copywriting, marketing, photography, and the dozens of other things that need to be done take you away from the core purpose of your business — the parts that make you money. Not only can friends and professional contacts be a great way to plug the gaps, they may also be able to help you when the time comes to secure funding.
Find a Partner
Sometimes it helps to bring your network in-house. Finding partners and collaborators doesn’t just lighten the load by spreading the work. Having someone else who can help you shoulder the financial responsibilities can also mean going further than you would alone. Prefer to fly solo? Explore businesses tangential to yours with which you can swap services or to which you can mutually refer customers. Just be sure that it’s all spelled out in writing for everyone’s protection.
Explore Funding Sources
There are many more funding sources available than even some experienced business owners realize. Among them:
- Crowdfunding: Use a Kickstarter or Indiegogo campaign if your business is product-based; this can be useful in the test phase
- Small Business Funding: Both nontraditional and traditional lenders (the latter often working in tandem with the SBA) can help with new business financing, though the qualifications can be a high bar to clear
- Venture Capital/Angel Investors: If your idea is good enough, someone else may be interested enough to want a piece of the action; this requires a great product or service, and an ironclad business plan
- Friends and Family: While approaching those close to you for funding can feel awkward, it can also be highly effective as long as you have the proper legal and financial protections in place for everyone involved
- Rollovers as Business Startups(ROBS): These effectively make retirement accounts the “owner” and funder of your business
- Personal Savings and Assets: There are times this approach is unavoidable, but you should take steps to separate your business and personal finances as soon as possible, the better to build business credit
Starting a business with limited funds is common enough that there are names for it, including bootstrapping and the lean startup methodology. It’s entirely possible to do, and even has a number of advantages. But there is, as always, a catch: you need to think long-term in order to ensure success, or to ensure a soft exit if you change your mind or things don’t work out. Alliant Business Systems has helped many small business owners get off to a solid start, so why not see how we can help you?