You dont always need a lot of capital to get a business up and running. In fact, sometimes you can get started with little to no funding. (Yes!) Being your own business owner, and starting a business with no money might initially seem like a far-fetched idea, but its not impossible.
Its true that to start and scale any business, youre going to need more than just extra cash flow. Youll likely need partners, investors and a solid plan for how youre going to use your new business funds to grow. But, when youre just starting out, you start out small. Even better: you can start out as small as you like.
If your plan is to open up a storefront where you sell your hand-crafted wares, you can always start by selling them to friends and family. You can build up a reputation and get initial feedback. Then, you can sell them on a third-party website online. After that, you can move on to hosting your own site and eCommerce store. You get the idea.
If youre worried about how you can start a business with zero funds, here are a few ideas on where you can start your future entrepreneurship.
Ask yourself what you can do and get for free
Its easy to come up with a list of obstacles standing in the way of you and launching your business. Its often harder to come up with a list of opportunities that are right in front of you. If the thought of starting a business with no money scares you, stop and reflect on what you can do without right now.
Whats essential to your business? Do you need the slick, custom-designed website when youve only perfected three items for your new online store? Could you do with creating a Facebook page to promote your business locally, instead? Or, would it make more sense for you to post your products for sale on a site like Etsy? Would it make more sense for you to design your own marketing materials on Canva? Could you barter and trade your skills/products/resources with someone else in lieu of payment?
To say there are a lot of free resources on the web is an understatement. Make a list of what you need for your business and then research free alternatives on the web. Some common ways to cost save are:
- Accounting Software and Bookkeeping: In your first year or two, you may not need both of these things. Consider family or friends, possibly even doing it yourself.
- Business Insurance: You may not need this in the short term if theres no liability issues in your business, or you dont have employees. However, it is good to have in the long-run because it will protect your personal assets in case of lawsuits or faulty products.
- Multiple social media accounts and extravagant marketing plans: While you may have outlined a kickass marketing strategy in your business plan, managing these accounts and ad budget are jobs in themselves. Look at cost effective ways to scale your marketing (SEO, Referral marketing, word-of-mouth) to get some revenue first. Focus on one or two social media accounts that resonate with your potential customers.
It might take time, and perhaps even require you to pick up some extra digital skills to optimize your online business, but youll save funds when you need them most.
Build up six months worth of savings for expenses
Admittedly, tapping into your savings account isnt the ideal situation. Yet, its a pretty common practice among entrepreneurs. When designing your business plan, be frank with yourself about how much youre spending and how much revenue youll likely bring in. Then, be realistic about how long it will take before you see a profit. Usually, it takes about at least six months before you start seeing any cash flowing in. Make it a goal to save at least six months worth of living expenses so you can devote yourself to your new business.
Ask your friends and family for extra funds
Remember, youre not asking for charity. Youre not asking your friends and family to support your wacky business idea. No, youve got a dream of a business and your business plan is solid. Youve crossed your ts and dotted the is. Thats why youre looking to those closest to you when making your pitch. Use your friends and family as multi-layered resources.
The types of support and advice family and friends can provide:
- Practical or strategic business advice: Your family and friends could be small business owners or entrepreneurs themselves. Ask them their stories, successes, trials and tribulations - you may run into very similar situations.
Questions like Does my business model make sense? and Do I need liability insurance? are completely valid.
- Monetary support: They may straight up give you money to want to partner with you for your idea.
- Networking: They may know people that have experience in the industry. These people could be customers, advisors and investors in their own right.
- Potential customers: Family and friends can be your very first customers.
Ultimately, practice your sales pitch with them. Ask for feedback!. Note: If your family can provide monetary support, make sure to write everything down and when youll pay them back. As a final note,you can even use a crowdfunding platform to encourage the people around you to encourage their networks to pitch in.
Know what type of business structure you want to have
Sole proprietorship, general partnership, limited liability company (LLC) and C-corporation may be legal structure terms you need to understand. As a start-up, you dont need to know how your business structure will be over the next 10 years. However, it would be advantageous for you to know what your structure should be in the next year. This is so you can structure your business appropriately. More than likely, youll start out as a sole proprietor, or in a partnership if you can convince someone to take the plunge with you :).
Knowing the type of business entity you want to evolve into, and how you share responsibility will affect your companys roadmap, financial planning and maybe even your business name.
Apply for a small business loan when you need extra cash
If youre looking for more capital and have been operating on a shoestring budget, consider applying for a small business loan. Banks and online lenders offer differing kinds of small business loans to customers looking for extra cash flow or investment funds. You can usually get more favorable terms with a traditional bank on-top of premium business bank accounts. Online lenders, however, are typically more lenient in their requirements. Business credit can have higher interest rates than personal credit, so be sure to monitor your spending.
If youre not looking for a lump sum loan amount, consider a business line of credit. In short, theyre like credit cards for your business. Theyre good options for purchasing items on an as-needed basis. (You can read about them and other small business loan options, here.)
Look to small business grants and local funding opportunities
Truthfully, grants for small businesses arent always the easiest to find or get. But, once youve got your business up and running (no matter how small), you can begin searching in earnest for free cash. Always remember that grants will usually have specific application requirements. So long as you meet those, youre in the running for a pot of cash thats all yours for the taking. Start your search in government databases and always be sure to ask your local small business administration (SBA) chapters for help.
Find out aboutand woopotential angel investors
Youve probably heard of angel investors, and with good reason. They come into play when its time to scale your business beyond you, yourself, and the handful of loved ones whove bought in. Angel investors are usually among the first people outside the company to invest in a business.
Unlike outside firms or other venture capitalists, angel investors put down their own personal funds. They can also make for the best kind of mentors, since many are former/current entrepreneurs themselves. (Find out more about how your can win over Angel investors, here.)
FAQs about starting a business
How important is market research to a successful business?
Market research is critical to a successful business. Market research has 7 different types of activities which can provide useful insight into competitors, your customer base, your target market and consumer preferences.
Good market analysis will allow you to dictate what kind of business you run in the long and short-term.
When starting a business, when do I need to start working with the IRS and taxes?
The IRS sees a business start at the date of incorporation. This is why starting your business and charging your first startup costs on a particular day can be important for the tax deductions during the tax season.
Is a business License important? And if it is, how do I get one?
Business licenses are important because they legally allow you to operate within the state you are doing business in, or that your company is based out of.
Theres a whole process to get a business license:
- Form your company and business strategy.
- Set-up your tax id number (TIN).
- Research what license you may need (Theres state, federal and industry licenses).
- Send in your application to your SBA office - (Dont do any business activities during this waiting period).
- Once you have your license, contact your lawyer or legal team to know any other stipulations (renewals, conflicts and scope).
Can I be a full time employee and have a business license at the same time?
You can indeed have a full-time job, and a side hustle at the same time. Here are some things you want to keep in mind:
- Online is easier - If your side hustle is freelance writing or optimizing someones website to increase their online presence - this is easier than running a clothing store. So think about how to best utilize your free-time when youre not working full time.
- Taxes - Be sure to register your employer identification number for your side business, which rolls up into your federal tax id. Youll essentially have two income streams coming in so tax season has just changed for you :).
If you choose to be a sole proprietor you may need business insurance more quickly. Personal liability can extend to other revenue streams and leave you bankrupt in case of malpractice or faulty products. On-top of business insurance, there are a variety of other things youll want to have to ensure your own social security. Work with an employment lawyer and refer to the SBA gov guidelines for best practices!