When the average person thinks of business, he or she would usually think of big office space, big signs, marketing campaigns, and fancy business plans. The truth of the matter is some of the biggest companies who are renting big office spaces, posting large signs, and executing fancy marketing campaigns, started with little to no money. Even big names such as Apple were founded by Steve Jobs and his partner Steve Wozniak in their small garage; Dell Computers, a $28B company, started with an idea and a $1,000 in capital; Playboy was founded by Hugh Hefner with nothing more than just enough money for the first issue, money he borrowed from a loan shark after mortgaging everything in his house. Whole Food Market was founded by twenty-five-year-old college dropout John Mackey who borrowed what little money he could from family and friends; in 2008 the company reported $6.5B in revenues. And, of course, we cannot forget Starbucks; the company that generated $10B in sales in 2009was built with nothing more than $1,400, invested by the three founding partners. Most people don’t know that the company lost money for 10 years before becoming the Starbucks we all know and love. Companies like eBay, Google, The Learning Annex, Berkshire Hathaway, Nike, Dyson, and Mattel, and tycoons like Ford, Rockefeller, Andrew Carnegie, Thomas Edison, and even Warren Buffet, have one thing in common: they all started with little to no money. They were all close to bankruptcy at some point, but all managed to make it big.
“It’s tough to think of a man who carried the torch of business further than Henry Ford. Ford became famous for pioneering the assembly line and, in the process, becoming the first man to successfully mass-produce automobiles. Amazingly, Ford jump-started the Ford Motor company with virtually none of his own money. As ‘Venture Capital Sources’ explains, Ford “raised a nominal sum of money from friends for initial working capital purposes. He then proceeded to cleverly negotiate deals with his suppliers that let him purchase parts on credit. This in turn motivated him to sell his cars quickly – at a profit – so as to repay his suppliers. After years of diligently reinvesting those profits back into the business, Ford Motor was an industrial giant – and its creator was forever immortalized as a business legend.” – Forbes Magazine.
So how did they do it? As “small business owners” without money, how did they achieve such a high level of success? Did they have a better product than the rest? Did they all revolutionize their industry? Were they all lucky?
This is a well-known scenario, one that “scares” most entrepreneurs into starting their own business: the excuse of “no money” is simply an excuse for inaction. Starting a business without money is as simple as learning to walk, and you don’t need any money when you are trying to learn how to walk, right?
The truth is that businesses cost money, and just because you don’t have any doesn’t mean that you cannot start your own business. There are a few tips and tricks to starting a business and turning it into a success without spending a fortune during the startup stage.
Part 1 – Starting your small business:
Tip 1 – Forget the “formalities”
Businesses start on paper. Before leasing an office, hiring employees, or spending a fortune on marketing efforts, you need to create the business “on paper.” Learning to build a business plan is a skill you cannot put a price on; evaluating potential profits, calculating margins, and creating a marketing strategy are invaluable skills.
When you decide to start a business, you must write the idea, evaluate it, and weigh all of the information in an unbiased, non-emotional way. You can determine if your business plan is realistic by taking into account the money you have to spend. Remember that $15 for a domain also counts as money, even if that’s all it costs. Write down the skills you have that may serve you in the business, for example, I met an inventor who had amazing skills in video-editing but never put them to use; after he began exploiting his personal “assets”, he was able to attract investors by creating stunning commercials and 3D presentations. So use your skills to your benefit– knowing how to design websites will save you thousands of dollars in the long run.
Tip 2 – Don’t spend anymore than you have to
Startup can be as cheap as buying a small computer, getting a domain name, and installing a website. You don’t have to rent an office; you can start working from home. And when a client wants to meet you, you can always meet at a Starbucks or another coffee shop. I know some good business owners who have their own office and spend most of their time meeting people in Starbucks. Nothing changes until you need to hire more people. Working from a free office space is a good way to get going. I own a book publishing business, among others, so I know that a 50-cent savings on a $5 book cost will save me a lot of money in the long run, because when I get an order for 1,500 books I’ll be able to save $750, the equivalent, in this case, of another 150 books. Don’t underestimate the value of pinching pennies when necessary; however, you should not try to save on necessary items such as legal advice when it is needed most or new equipment that will save you hours of work, etc. Use your brain and don’t spend any more than you have to.
Tip 3 – Get free workers
People are amazed to know that I hired 5 people as a small company: a copywriter, a public relations agent, and three salespeople, when I had little to no money about three years ago. I did it by using the power of internships: a few free “Interns needed” ads on Kijiji got emails flowing into your inbox with resumes of young, talented students who want to get more experience on their resume. The best part about it is that you have the time to evaluate your workers before you decide to hire them full-time. If you have the budget, you can offer a paid internship to help motivate your interns to do a better job for you. Just be sure not to mislead anyone by promising them work when you cannot deliver.
Tip 4 – Get free advisors
Mentors make great advisors. I have a few mentors who I can call for advice whenever I am in trouble. It will only cost you the price of dinner, lunch, or a cup of cappuccino at Starbucks, yet the advice is invaluable. If you don’t have a mentor, you can find one at Score.Org
Tip 5 – Download documents
Instead of paying attorneys for contracts and costly legal documents, you can find any document for free on the internet. Copyrighted documents, contracts, and agreements are all available for download online.
Tip 6 – Incorporate on time
Don’t spend a lot of money on incorporation at first. The only time you need to spend money on incorporation is when the business begins to make money, not before. There are countless sites online that provide incorporation as a service; in New York it will usually cost you about $250-$400.
Tip 7 – Do your own finances
Don’t start with fancy accounting software, or look to be represented by a big firm, when you are just starting out. You are testing the waters, you are building your business, so you need to know how to manage your finances. Learn to manage your own financial statements on Excel, or try the free version of QuickBooks, available on their website. They offer free tutorials on how to manage your money using the software, and you can take advantage of this information for your own use on Excel too.
Tip 8 – Build a website
A domain should not cost more than $10, and a good site may cost about $25 a month. Don’t overpay at first for an expensive design, the $400 you would save on the site design can easily be invested in your sales efforts. And even if you would feel the need to invest a large sum on web design, do your homework; I once invested $650 on a site only to find a freelancer who had better work for less.
Tip 9 – Use social networking
Facebook, Twitter, and other social networking sites are the new way to reach the billion consumers who use these sites on a daily basis. There is no better way to promote your business and get noticed, instead of paying thousands to Google Adwords and other online advertising campaigns, you should defiantly have a presence on social networks, it’s a great way to get free advertising and connect with repeating clients.
Tip 10 – Write a blog
Blogs are a great way to create a fan base, which you can later convert into Twitter and Facebook followers, take 30 minutes a week to write about something you really good at, then spend another 20 minutes distributing this information in blogs, as articles or other sites; this is a good way to build your brand name, without investing any money.
Tip 11 – Build a brand
When people think of building a brand name, they think of commercials and fancy marketing campaigns, however, you need nothing more than a logo and free time to invest in your business brand, you don’t need a fancy graphic designer for that, LogoYes.com will help you create your own logo for practically free.
Tip 12 – Accept credit cards for free
You don’t need sophisticated merchant systems and big accounts to charge clients with a credit card. Simple sites like PayPal, Google Checkout, iVerified, and Amazon Payments are excellent alternatives to charging a client’s credit card without paying money for an expensive device. You can also use e-Junkie for a complete shopping cart, although I recommend PayPal.
Tip 13 – Add products and services
Make sure you offer services that are linked to your expertise and the company’s brand. If you are selling books, be sure to add a “Self-Publishing” service. If you fix cars, be sure to increase sales by selling parts or washing cars. If you have a small grocery store, be sure to add an advertising service by posting posters in your store and selling advertising spots to potential advertisers.
Tip 14 – Pick a “smart” name
When choosing the name for your business, check to see if your domain name is available. The name you choose should be dissimilar to that of the competition, so that it will be easy to find you using search engines.
Tip 15 – Gain maximal “free” exposure
Some small business owners are having a hard time exploiting the internet for their own benefit. Using YouTube, Facebook, Twitter, WordPress, and other free sites is crucial for the success of your business. if you are of an older generation that does not have the internet expertise that the younger generation has, ask a son or daughter, a niece or nephew, or a young friend to teach you. You must adapt to your environment.
Tip 16 – Participate in markets
If you have a business that sells products such as food, beverages, bags, clothing, or electronic devices, you can capitalize by selling in local markets. Most big cities have a big weekly market; renting a booth and participating in events is a great way to spread the word about your business.
Tip 17 – Use eBay
Most products may be sold on eBay and this is a good way to sell your merchandise worldwide without spending much money on advertising. Just take the cost of posting on eBay under consideration.
Tip 18 – Use your assets
Use your assets to get more business. Ask friends to forward clients, use your skills to provide additional services, and do whatever you can to maximize profits by saving on unnecessary items, Don’t spend any more than you have to.
Tip 19 – Set big goals
Without goals, your business won’t get far: set realistic goals, and be sure to stick to them. I recommend setting a big goal, and focusing on it. Do it one step at a time, but make sure to keep your big goal in mind. Don’t build a business just for the sake of “supporting your lifestyle” or “paying the bills,” build a business to build a fortune, to change the industry, to dominate a certain field, to educate yourself further, to travel the world, serving more people or to give to charity. Setting big goals will drive you, because there is no fuel in small goals, and your business will be out of gas as soon as you take off. Don’t make the mistake of setting small goals.
Tip 20 –Create an allotment chart
When I was 19, one of my closest mentors told me about the Allotment Chart, a simple chart that you create to follow your company’s cash-flow allotment; in this chart, you divide your company’s net profit to invest more in yourself, and invest more in your company; for example, if a small business, in its first year had a net profit (after expenses and taxes) of $5,000 in January, what would a small business owner do with it? Would he/she buy more equipment? Invest in marketing? Spend it on doodads?
Well, the purpose of the allotment chart is to divide that money in a way that best fits your business, 10% can be invested in new equipment, 30% invested on marketing, 10% invested on business development and the remaining 50% left in the bank for next month’s working capital.