Starting any business is fraught this risk, but starting a business with little to no money and eschewing all debt is quite tough. Starting a debt-free business with from nothing is not impossible and there are a few things that you can do to make it easier. Debt doesn’t have to be a noose around the neck of you or your business. Here are 7 Steps you can take to open a debt-free business with no money.
Make A Business Plan
Before you start up your new business, you’ll need a plan. A business plan is a necessity for any business, but for a business being started with little to no capital, a business plan is imperative. It helps you focus on what is important and how you’ll accomplish it. You’ll want a business plan that fully develops a picture of your business and its complexities.
A good way to start to is to utilize the Business Model Canvas. It’s a tool used around the world for startup businesses. They utilize it to both design and describe their business model all on a single page. You define your value propositions, customer relationships, key resources, key partners, and more. It can be a good lead-in to creating a full business plan.
Developing a one-page business proposal can be a very good intermediate step between the business model canvas and the full business plan. The single page business proposal was popularized by Patrick Riley. It’s used successfully across many industries and represents a streamline what it is that your business does and what you hope to accomplish.
Finally, you’ll want to develop the actual business plan. The business plan is out of the scope of this article. Nevertheless, it’s important and you’ll want to develop it to keep your business focused in its early days.
Avoid Business Financing Traps
Avoiding the trap of debt means giving your business the best chance of growth possible. Why? Debt saddles your business with a need for immediate cash flow from day one to service the debt. Instead of plowing cash flow into debt repayment, you can use it to grow your business. Banks are off the table.
Silent partners and angel investors are often seen a good source for business startup capital, but angel investors are often anything but angels and silent partners are only rarely silent. You end up giving a large slice of your business for a relatively small amount of capital. Moreover, you have other people making decisions for your business that may not be what you feel is the best.
Leverage Your Talents
With limited capital, you are going to need to leverage your talents. Make a personal talent inventory. You’ll want to identify what you are good at, what you need to work on, and what you may be better off outsourcing. You’ll want to ensure that you are best utilizing your talents in those areas that can bring the most revenue. Remember the Pareto Principle. 20% of your work is going to lead to 80% of your income.
If your talents don’t lie with taking care of the company’s books, then, by all means, use an online service that can do it for you. Don’t be afraid to outsource because the time you save can be used leverage your talents. You might find that you can get significant savings by outsourcing the low return work that steals your time.
Engage in Nontraditional Marketing
Marketing is a huge budget item in any new business venture. In order to make sales, you need customers and these customers need to know about your product or service. Reaching these customers takes time, money, or usually both.
25 years ago, new businesses had only a few expensive ways to market their business. They could place an ad in the yellow pages, they could take out an ad in the newspaper or on radio or TV, or they could engage in direct marketing through the telephone or direct mail. These methods were expensive and had an element of randomness.
Fortunately, nontraditional marketing makes it easier and cheaper to reach customers than ever before. Companies can reach potential customers through websites, blogs, email, videos, social media, and online ads as well as traditional marketing venues. The cost to reach a potential customer is lower than ever. Inbound marketing is the future of marketing.
Not all nontraditional marketing is created equal. While it’s entirely possible to build a website and blog and put up a social media presence, none of this guarantees that your efforts will be successful or optimal. Search Engine Optimization, or SEO, is extremely important when you are engaging in nontraditional marketing.
Most people visit Google when they are trying to find a business and they usually go with the first result they find. According to SEO expert Chris Walker, proper SEO practices ensure that your web properties are optimized for search engines and that you are one of the top results when people search for your products or services. The payback from proper SEO represents a great return on investment.
Approach the 3 Fs
While you do want to avoid silent partners and debt when starting up your new business for reasons stated above, these warnings don’t apply when getting investments from the 3Fs. Friends, family, and fools are the 3 Fs of the financial world. It’s not a derogatory term by any means, rather it’s a recognition that these people love you, believe in you, and are willing to invest money without worrying about potential financial returns or even payback guarantees. They will, of course, want some equity but not so much that it will cripple the management of your business.
Keep one thing in mind. Your grandma may be a savvy investor and she may want a little bit more return on her investment than a card on her birthday.
Utilize Crowdfunding Sites
While you are avoiding debt, leveraging your talents, and finding ways to cut down on costs, you can and should look at crowdfunding sites. Crowdfunding sites can be a way to generate money to start your business without giving up equity or otherwise saddling your company with debt.
Gofundme is a popular crowdfunding site that allows you or your business to solicit donations for starting up. A percentage of the amount raised is kept by the site, but it’s an easy way to get people to donate the money need to start your business up. It’s particularly useful if your business is serving a greater good. It’s also a great way to take donations from the 3 Fs.
Kickstarter is another popular crowdfunding site. For Kickstarter, you need to take an idea and make a goal. If you reach the goal, then you receive the donations. It’s all or nothing. Projects on Kickstarter usually offer a reward in the form of products for donations that exceed a certain amount. The only strings tied to the money raised on Kickstarter is that you complete the project and fulfill your rewards.
Use What You’ve Got
This could have been listed first, but it’s best listing this last. Use what you’ve got. This is more than just leveraging your talents. Use every resource that you have to help start your business with little to no money. You don’t need to spend precious capital on expensive office equipment or furniture. Use what you already have. Inventory your personal property and see what you can use right now.
A popular story from the early days of Amazon is that Jeff Bezos didn’t have extra money to spend on tables but did have extra doors. He would set up doors on sawhorses to use as tables and desks. To this day, you can visit Amazon facilities and see doors used as tables. You may not need to use doors for your tables, but you can implement the idea. Don’t buy if you already have a suitable substitute on hand.
With debt avoided and capital spared, a business can be stronger and more prepared for challenges. While these 7 steps can help you start a debt-free business with no money, they can also help any business startup with less debt and less spending. It’s all about being a leaner business startup that can quickly and effectively deal with changing economic conditions. That’s a bonus for any business.