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Maybe you’re tired of your job. Or maybe my article on why you need multiple sources of income was convincing. Whatever the reason, you want to start a business.
But what if you have nothing saved, and even businesses you can start for $200 seem beyond you at the moment? How can you start a business when you have no money?
First, recognize that having no money doesn’t mean you have nothing. For example, last week a guy in the parking lot of Safeway cleaned my car windows for $2. The rag he used was an old shirt, so at most he invested $1 for the spray bottle.
Not thrilled about washing car windows? That’s okay. You can start plenty of other businesses with nothing. For example, below I’ll explain how my wife and I started a six-figure internet publishing business for $81.
And if you don’t think $81 (or $1) qualifies as “no money,” don’t worry. We’ll look at ways to start from absolutely zero cash and build from there.
Start With What You Have
As I said, having no money doesn’t mean you have nothing. Here are some of the things you might already have that will help you get started in business:
- Your knowledge
- Your skills
- Things you can turn into cash for startup capital
- Friends who can help you
- Your ability to borrow tools
- Your ability to borrow money
- Your willingness to work
- Your willingness to learn
- Your access to YouTube videos
- Change dug out of the couch cushions
Just about anything can be used to move you forward financially. For example, if you know how to fix things and you have some tools you can start a handyman business today.
No tools? If you have a friend with tools you can borrow, you’re in business. If you have a credit card, you’re in business. If you have anything in the house you can sell on Craigslist to raise money for tools, you’re in business.
No skills? Start fixing things around your home to get experience. Help friends fix things around their homes. Watch YouTube videos to learn how to fix things. Get books from the public library.
Notice that nothing mentioned above requires you to have a single dollar of cash to start.
By the way, small starts can lead to big results. Matt Shoup started M&E Painting by going door-to-door looking for clients. He did $500,000 of business his first year, and eventually grew annual revenues to over $2 million.
Did I mention he started with $100? Your mom would probably lend you that much if you tell her Matt’s story. There’s always a way to go from nothing to a little cash, and then use that to…
Bootstrap Your Way to Success
BusinessDictionary.com says bootstrapping is “Building a business out of very little or virtually nothing.” Apple, Clorox, Coca Cola, and Microsoft are examples of companies that started this way. Here’s a bootstrapping formula to get you started:
- Choose the right kind of business.
- Find the cheapest ways to start.
- Keep overhead and operating costs as low as possible.
- Identify and implement low-cost ways to make a sale.
- Invest revenue into things that help expand your business.
- Repeat steps 4 and 5 to keep the business growing.
Let’s look at these steps one at a time…
1. Choose Your Business
Choose a business you’ll enjoy, or at least feel comfortable with. It’s hard to maintain the necessary motivation if you hate what you’re doing.
Although not a necessity, it also helps to choose a business for which you already have relevant knowledge and skills. If that’s not possible, at least choose one for which you can easily gain the necessary knowledge and skills.
More to the point of this article, when you have no money the “right kind of business” is one that has low startup costs. That brings us to my own experience, which I’ll use to illustrate each of the six steps…
My wife and I started an internet publishing business 13 years ago because I had a beat-up old computer and I figured I could write well enough to create websites. Within a few years we were making six figures annually. Here are our startup costs:
- Two domain names: $16 (might be $20 now)
- FTP program for uploading pages: $40 (free ones are available now)
- First month of website hosting: $25 (can be cheaper or even free now)
That’s a total of $81! There are many online businesses with low startup costs.
I’ll have more to say about how to raise that $81, if that’s an issue, but first, here are some other low-cost businesses to consider:
- House Painting
- Window Washing
- Auto Detailing
- House Sitting
- Pet Sitting
- Dog Training
- Mobile Pet Grooming
- Errand Service
- Resume Writing
- Craft Making
- Senior Companion
- Scrap Metal Recycling
- Yoga Instruction
- Tax Preparation
- House Cleaning
- Boat Cleaning
- Flea Market Vending
- Computer Setup
Once you choose a low-startup-cost business that fits your skills and interests, you can…
2. Find the Cheapest Ways to Start
Even if you choose a business that normally has low startup costs, it helps to further reduce those initial expenses as much as possible. There are always ways to do that.
For example, rather than spend hundreds of dollars for page-making software, my wife and I borrowed a program from a friend (and used it for years).
Get creative in looking for ways to minimize those costs. A few years back, a painter we hired for $35 per hour admitted she learned how to paint by attending free Home Depot workshops. That beats paying for lessons.
You can also save money by doing work that doesn’t require a license to start. For example, painters are on Florida’s list of services that don’t require a license. If you want to offer other contracting services, your painting gigs could generate the money needed for the licensing process.
Here is a very short list of strategies to reduce the amount of money needed to start your business (there are many more specific tactics depending on the business):
- Borrow necessary tools and equipment from friends
- Buy used tools and equipment
- Rent tools and equipment
- Buy minimal inventory to start
Besides keeping startup costs low you also need to…
3. Minimize Your Overhead and Operating Expenses
Sure, Amazon grew big (and eventually profitable) by losing money year after year, but you need to turn a profit next month, right? You don’t have Amazon’s capital, and it’s less stressful to grow your business when you’re making money every month instead of losing it.
In fact, it’s estimated that poor cash flow kills 25% of small businesses. And, while it’s useful to understand the difference between operating expenses and overhead expenses, it’s even more useful to keep both at a minimum when starting with nothing.
For example, when we started our websites we had cheap dial-up internet service. Tediously slow? Yes. But by keeping our operating costs low we were profitable within a month or two.
If possible avoid some expenses altogether. For example, a cleaning business doesn’t need an office. It can be run from home to start (or forever). Another example: Use your personal phone for business and buy a business phone after you make some money.
If your ongoing costs are low enough you’ll be making a profit as soon as you…
4. Find Inexpensive Ways to Make Your First Sales
When you start with nothing you need to make money fast. And, in keeping with your goal to keep costs low (and so turn a profit from the start), you also want to find the cheapest way to make a sale.
For example, whether you’re auto detailing, window washing, or selling used stuffed animals at flea markets (my wife and I did that), start with low prices to make some sales. Don’t keep prices too low for long (that can kill your business), but use low pricing as a way to get a fast start.
Do anything else you can do to make those first sales quickly. Offer your products or services to family and friends, go door-to-door, stop people in the street.
To turn a profit as quickly as possible (as in before you burn through that $20 in startup capital) keep the cost of sales low. Don’t pay for advertising (you can do that later, if necessary). Look for clients nearby to reduce transportation costs. Do jobs that only require the tools you already have (you can buy the other tools later).
When we started our websites we put pay-per-click ads on the pages right away. I promoted our websites using free tools like writing for article directories and linking back to our sites. We had revenue within a month (and didn’t pay for advertising for years).
Once you have money coming in, it’s time to…
5. Invest Back Into Your Business
Once you have revenue you can begin to upgrade your tools and the image of your business. You can buy what you need to get higher-paying gigs or clients, have business cards made, form an LLC, buy liability insurance, and so on.
Once our websites were generating enough revenue we bought a better computer and upgraded to cable internet. That made things faster and easier.
But be careful. There are a number of ways that growing too fast can kill your business.Try to fund the growth out of revenue, not debt.
Buy new tools and equipment as needed, rather than trying too hard to anticipate your future needs. For example, if you have a window cleaning business, don’t buy equipment for cleaning fifth-story windows because you might need it. Wait until you actually have a client with high windows, and then buy the necessary equipment.
6. Repeat and Succeed
To grow larger repeat steps 4 and 5. Keep finding low-cost sales and keep reinvesting into your business.
By the way, starting small can make sense even if you have the money for a larger startup. If you start big a failure can wipe out your life savings and leave you deep in debt. When you start small you can afford to fail several times and keep trying again until you succeed.
What if You Really Have No Money?
Okay, I use examples of starting with $81 or “a couple hundred dollars,” and this is an article about starting with nothing. So here are two strategies to use if you really have less than a dollar to your name:
- Start a business that requires zero upfront investment.
- Find a way to raise the minimal amount of money needed to start a low-cost business.
There are ways to start directly with nothing. For example, William Feller started his lawn care business by borrowing a lawn mower, and eventually made more than $15,000 per month. Borrowing the necessary tools is a great way to go.
Many online businesses can be started with nothing. For example, you can start a free blog and post affiliate links on it. As soon as you make a few commissions you can use the money to upgrade to a regular domain name ($10 per year) with regular hosting ($5 per month).
Basic service businesses can often be started with nothing. Lawn care can be done using the client’s tools, for example. Windows can be washed using whatever you already have at home. Pet sitting just requires your presence.
The indirect option is to raise the money to start your business. Since you’re starting a low-cost business, putting together enough capital isn’t too difficult. Sell something you own, borrow $200 from a friend, or rent out rooms in your home.
Debt isn’t too dangerous at low levels, especially if you’re confident of success, so using a credit card to buy supplies is another way to start with nothing.
Examples of Starting With Nothing (Or Close to It)
Did you know billionaire David Green started Hobby Lobby with $600? Or that Sunday Steinkirchner started a rare book company for $1? And Googling various phrases like “started with $100,” results in plenty of examples of low-cost-startups.
You may be surprised by the types of businesses that can be started cheaply. For example, a flooring business sounds capital-intensive, but Toby Woodward started his successful flooring company “with $50 and a box of business cards.” He just installed floors at first, and eventually had the money needed to buy inventory.
How about an appliance business? Do you need a fortune to start one of those? Ryan Finlay, who makes a living buying and selling used appliances on Craigslist, says he started with “no money, tons of debt and a family to support.”
How do you start buying and selling appliances with nothing? On Craigslist, in the “for sale” category, click on the link that says “free.” Here in Tucson the Craigslist freebies advertised at the moment include a washer, dryer, stove, and dishwasher.
Nothing there? Keep checking until a free appliance shows up. Go get it, fix it, and sell it. Then buy another and repeat the process.
You get the idea. There is always a way to get started from right where you are.
If you have your own story about starting a business for nothing, please tell us below… and keep on frugaling!