No money? Don’t despair, today I have some tips on how you can start a business even if it looks like you’ve got no money to invest. I’m also going to tell you about some of the pitfalls of starting a business on a very tight budget.
But first, here’s the challenge. You don’t need much money to start a small business from home, but the chances of a bank lending you this money may still be pretty small. Plus you don’t really want to take on (more?) debt right now. You’re already on a tight budget because you’re a) not working b) working part time or c) spending a big chunk of your salary on childcare. So you don’t really want to spend money on a business that should be putting food on the table or clothes on your kids.
You can start a business on a small budget, but you can’t do it on no budget at all, so what should you do? Here are some ideas:
- Keep your job for a while longer
If you have a job, keep it for a while longer than you planned and funnel some of your earnings into your business. If you’re able to, try to phase in your business as you phase out your job. So start your business in your spare time (I know, not easy) and then cut your hours down to part-time once your business has grown a little. Eventually you can give up the job completely. Here’s how Louise Gibbs of Baby Signing Mummy did it.
- Keep your business expenses low
You can start a business for far less than it used to cost. You can get a website from just £2.99 per month from Create, for example.
- Freelance
This is like creating your own part time job. Write down the skills you have and the work you might like to do and then put the word out that you’re available. You could both online and off, for example by phoning friends and family or by using Twitter or Facebook. Do you or your friends know any self-employed people? They might need some short-term help with something as simple as basic data-entry or mailing out some catalogues. I’m not talking about setting yourself up as a virtual assistant here (although this could help you get started as a VA), just getting yourself some casual work.
- Pick a type of business that doesn’t need much money to get started
Setting up a small service business or an online shop (or even becoming a freelance writer!) will usually need less investment than inventing a product and bringing it to market, for example.
- Swap skills
Work out what you need and swap skills with someone else who is just starting out.
- Put your earnings back into your new business for a while
As soon as you start making a little money, even as little as £20 here and there, put that back into your business. You’ll grow slowly, but you’ll be debt free and you won’t be taking any big financial risks along the way.
- Ebay it
If you sell some of the stuff cluttering up your loft you could make a couple of hundred pounds which may be all you need to get started.
- Loan from friends or relatives
If you’re very lucky you may find someone will lend you the money you need. If you do this it’s best to put this in writing so you’re both clear about how much is being borrowed, when you’ll pay it back and any input the lender is going to have into your business. This will help prevent tension later on.
- Spread it
If you can’t afford something in one payment, you could try to negotiate spreading it over (say) four monthly payments instead. That will give you time to make some money.
- Claim anything you’re entitled to
If you were employed in the previous tax year but left your job or reduced your hours to part-time part of the way through the year, you may have over-paid some tax and should claim it back. Make sure you’ve claimed all the benefits you’re entitled to as this could free up some cash in the family budget to put towards your business.
And now the pitfalls…
I wanted to write this post to show that don’t need a lot of money to start a business. Creativity, determination and an ‘if you don’t ask, you don’t get’ attitude are more important than starting out with lots of money. That’s because, with the right attitude, you will find a way to get where you want to be.
But do be careful as trying to do everything on the cheap could have some unpleasant side-effects…
- Not investing in yourself
You’ll need to invest in yourself if you’re going to build a successful business. If you’re working with a tiny budget, you’ll be learning what you need to know for free on the internet. And while that takes you some of the way, there will come a point where you need to spend some money on your own learning.
Why? Well the information on the internet is scattered and often contradictory. Finding out what works for free is a long process of trial and error – you’ll save a ton of time and frustration if you’re taken through a series of ‘lessons’ that build on each other instead. Money spent on training is rarely wasted as long as you make good use of of what you learn.
Don’t learn the tricks of the trade, learn the trade.
- Having a ‘scarcity mindset’
If you’re working with a budget that is unrealistically small, everything seems to be over-priced. You can end up sweating the small stuff like saving pennies here and there when you should be focusing on taking your business to the next level. It can stop you from being generous with you time as well as your money, which holds you back because helping other people out is a great way to build business relationships.
You can develop a sense that there’s never enough to go around – enough money, enough work, enough clients, enough time. That can lead to you under-charging which keeps you stuck in the ‘there’s never enough’ trap. If you feel trapped in a financial corner, you’re not open to new ideas and opportunities, so you miss chances to grow your business.
The secret? Keep your mind open and your attitude big even if your budget is small. Think bigger and your business will grow.
- Doing everything yourself
Running and growing a business requires a lot of different skills – web design, copywriting, graphic design, bookkeeping, financial planning and administration to name a few. You can try to do them all yourself to save money but you won’t be able to do all of them well. Eventually you’ll either reach the point where some aspect of your business isn’t being done professionally (e.g. your logo looks home-made or your books haven’t been kept up to date for a year) and this will stop your business from growing. Or you won’t make much progress because you simply don’t have enough hours in the day to do everything yourself.
Read more about why you cannot do it all yourself for free here.
- Competition
If your business is inexpensive to start up, the barriers to entry will be low so there will be many other people doing the same thing as you. You’ll need to find a way to rise above everyone else to get noticed. Look at the other business that are doing the same thing as you and work out how you can make your service better, be more targeted to your audience, be more interesting, faster or whatever it takes to stand out. But avoid trying to compete on price because eventually someone will beat you.
So is it OK to start a business on the cheap?
It’s certainly possible to build a business from nothing and plenty of people have done this. But you need to be realistic about what you can achieve with little or no money. Eventually your business will need more investment if it is going to grow, so it’s best to be prepared for this from the beginning so you can build it into your plans.
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photo credit: [nohide]Camera Eye Photography[/nohide]
Some wise words here! Bits from the Having a ‘scarcity mindset’ para are ringing very true with me at the moment!
Thanks Julia, I think the scarcity mindset creeps up on all of us from time to time. It certainly gets me every now and then!
I trihnk you can if you are running the business at home and have little overheads. I like the idea of skills swap. I did a bit of this at the set up of my business. I do think it is tempting to often throw money at new business to see if it will succeed. If it is meant to it will – on a budget.