Finding money is one of the hardest first steps an entrepreneur needs to do when starting a business. The amount of capital a business has – and manages to raise – can spell the difference between success and failure.
All too often, however, many small and home-based businesses start without any money saved. Worse, some don’t even have any money at all. Instead, they are putting all their hopes that the business that they are about to start will bring them money.
Unfortunately, as the saying goes, “It takes money to make money.” Without any money at all, it will be very hard — not impossible, but very hard — to successfully get the business off the ground.
If you don’t have any money and still wants to start a business, here are some things to consider:
1. Make sure that you know how and are able to stretch the meager resources you have.
You need to have tons of creativity on how to stretch the few dollars that you may have. Expect to do a lot of hard work yourself, and use every free strategy that you can think of. For example, instead of hiring a web designer to create a website, you need to learn how to design and develop your website. Instead of spending on banner advertising or cost per click advertising, you need to work hard on finding effective shoestring marketing strategies such as word of mouth advertising and the do-it-yourself marketing.
2. Prepare to compromise — a lot.
Without having any resources, you may be forced to cut a lot of corners and compromise on a number of things. For example, the inventory you will buy may initially be very limited so your vision of starting a one-stop home furnishing online store may not come into fruition immediately.. You may need to downsize or break down your overall business plan into tiny little pieces based on the resources that you have.
3. Be prepared to downscale your plans.
Your lack of capital will hinder you from doing everything you may be planning for your business, and you might not be able to do everything you’ve set out to do. Be prepared to be flexible and be willing to shift gears. For example, you may be planning to start a bed and breakfast business; but without any capital to do a massive renovation of your house, you may be forced to just open with one room instead of the planned 8 bedroom inn.
4. Without any money at all, forget about going to the bank and other lenders.
No matter how excellent your business plan may be, if you have no money, banks and other lenders such as the Small Business Administration, will not give you the time of day. Lenders want to see that you they collect the money they will lend you, and that means having the resources NOW in terms of your collateral and other assets.
5. Understand that your business may not produce any profits immediately.
If you’re really lucky and hit the jackpot, the business may be profitable from the get-go. Alas, for majority of new businesses, it may take awhile before you can see any profits. This is an important factor to consider when you are relying on the business to produce the income your family needs to survive — and it is not earning anything. Or if you borrowed money from friends and relatives expecting to pay them immediately when the business starts earning profits, and you have nothing to pay them with.
I’m not saying that you can’t start a business without any money. But it is very important to understand that things will go very hard at the start. Starting a business in and by in itself is hard, more so when you have no capital at all to start it.
The best way is to save some money first before you think about starting a business. Have enough money to allow you to pay for at least the first year of your business expenses, while making sure that you have saved at least 6 months for your own and your family’s living expenses. Or line up your possible sources of funding — e.g. Has Aunt Ellen given you her blessing that she will lend you money and does she understand that you may not be able to pay the loan immediately?
Plan your goal of starting a business. Start living frugally while saving money for the capital you need. With adequate resources, you stand a better chance of seeing your business succeed.
Recommended Books on Financing Your Business:
- Financing Your Small Business: From SBA Loans and Credit Cards to Common Stock and Partnership Interests (Quick Start Your Business)
- Financing Your Business: Get a Grip on Finding the Money (Numbers 101 for Small Business)
- What No One Ever Tells You About Financing Your Own Business: Real-Life Financing Advice from 101 Successful Entrepreneurs
- Unlimited Business Financing: Learn How To Obtain $250,000 Or More In Business Funding Without Harming Your Personal Credit