Looking for a giant venture-capital firm or philanthropist to bankroll your business idea? Get real! But don’t let a lack of funding stop you from pursuing your dream. You can start a business that actually makes money, even in this tough economy.
“Fixating on some outside source of capital is a great way to make launching the business someone else’s responsibility,” says Robert Tuchman, successful entrepreneur and author of Young Guns (Amacom, May 1, 2009). “You don’t want to do that,” he assures.
Here are eight steps you can do to launch a business in a tough economy:
1. Start with self-financing.
Use your own savings.Cash in that pile of birthday gift bonds. Start with as little seed money as necessary and plow revenue from sales right back into the business. Instead of wasting time searching for funding, spend it on finding customers and delivering great results. If you can’t swing it alone, consider asking family and friends for a loan. Even if loved ones are financially comfortable and eager to help, tread lightly. Don’t risk ruining your most valuable relationships.
2. Borrow, but with caution.
Credit card accounts and banks can still be good sources of money when starting a business. Just be sure to talk to a reliable financial advisor first. Shop around for the cheapest options and lowest interest rate terms. At all costs, avoid taking on the burden of unnecessary debt.
3. Do business from home.
Save money on renting office space by doing business out of your own living space. Install a separate phone line or purchase a cell phone for business use only. Print your own letterhead and business cards. Your clients will never suspect that “Suite 12B” is really apartment 12B.
4. Don’t delegate all the grunt work.
When they started their company in Burlington, Vermont, back in the 1970s, Ben Cohen and Jerry Greenfield really did scoop a lot of ice cream themselves, by hand, and really did make a lot of deliveries to local stores from the back of a battered Volkswagen. Even if you’re the founder and boss, when you’re just getting a business off the ground, be willing and ready to do most of the work yourself.
5. Know when to show a loss.
From day one, account for everything and anything that represents a legal expense related to the business, from the cab fare or car toll to meet with a prospect to the lunch tab. When you’re starting a company, it’s natural to want to feel as if you’re making money. Still, it often pays more to list every individual expense and take the loss, because your tax obligation might be a lot lower as a result.
6. Invest in right software.
Try to do the numbers on your own. But don’t reinvent the wheel. Pick a proven software program — such as Peachtree or Quickbooks — that will allow you to keep track of what’s going on in your business. If you dread the idea of entering numbers into a computer, delegate this job to someone you can trust. Then make sure he or she follows through.
7. Stay on top of your numbers.
Establish a budget for your business from day one. Create monthly financial reports to gauge how you are doing, the reality versus your projections. Devote a set amount of time each week to reviewing the numbers. These disciplines will help you make sound decisions, both short-term operation and long-term strategic, and use your resources wisely. If you struggle with crunching numbers or staying organized, consider contracting an experienced bookkeeper to come in once a week. Or, if you can afford it, add a part-time accounts payable specialist to your team. To get started, stop by www.GoodAccountants.com, a free service that will help you connect with good candidates.
8. Hire inexperienced people with lots of passion.
Take a risk on hungry, energetic young people who might be willing to work for less money than experienced professionals. Enthusiasm and a positive attitude will do more for your company than any other attribute in an employee. Look first and foremost for people who “get” your vision and who are truly motivated. Walt Disney made a habit of hiring recent art college graduates whose attitudes he liked — and then trained them in the skills he needed to develop as animators. That pragmatic practice can work magic for your company, too.
Adapted from Young Guns: The Fearless Entrepreneur’s Guide to Chasing Your Dreams and Breaking Out on Your Own by Robert Tuchman (AMACOM, May 1, 2009; $21.95 Hardcover, ISBN: 978-8144-1070-7)
Robert Tuchman is the author of the book “YOUNG GUNS: The Fearless Entrepreneur’s Guide to Chasing Your Dreams and Breaking Out on Your Own”