“I have a great idea, but I don’t have any money to start up”, is one of the most common things heard in the entrepreneurial world. If that’s you, don’t worry, you’re not alone, many entrepreneurs have been in that position, especially when first starting out. Unfortunately, it does take money to start a business and it does take money to make it grow. The good news: if you don’t have very much, or none at all, it’s not a deal breaker. There are many ways you can start a business with very little to no money.
Get a Loan
Many startups begin with a loan. There are a number of different options out there for small business loans including banks, your network, and other agencies.
Banks – Banks typically require a complete business plan, good credit, and some sort of
security like a co-signor to ensure the loan will get paid back. They may also want to see
some proof of results.
Personal Network – Don’t be afraid to go to your personal network, you never know if
there is someone there that would be willing to help, even if you have to put
together a number of small loans from multiple people.
Other Agencies - There are also a number of agencies and organizations that offer
business loans, such as the Small Business Administration in the U.S. These
agencies are great options for small businesses that have trouble getting a loan
from a bank. Each typically has its own requirements.
Most loans require that you’ve done the work to prepare a good business plan, and some kind of backing that you’ll be able to pay the loan back. The great thing about loans is that you maintain complete ownership over your business.
Search for Business Grants
There are a number of programs, non-profit organizations and other business groups that offer grants to entrepreneurs starting a business. They are usually offered regionally and often geared at specific fields and industries. Each typically has its own specific set of requirements in order to qualify, with many requiring a business plan or raising capital to match the amount of the grant. Some grants require you to submit ongoing updates and results as you start out. The great thing about grants is that you don’t have to pay them back and you retain full ownership of your business. It may take some research to find some business grants in your area, but could be well worth it.
Platforms like Kickstarter and Indiegogo allow someone to source funds from others in exchange for some kind of reward, usually related to your product or business. All you really need is a good idea or product and some things to get people excited like a good video and pictures. Crowdfunding is usually all or nothing, so if you don’t raise your target amount, you get nothing. On the plus side, with crowdfunding you can start to build some excitement behind your business and product, and like a loan, you maintain full ownership.
If you’re willing to part with some ownership of your business, it could be a good option to seek out angel investors or venture capitalists. Angel investors are wealthy individuals (need to have minimum net worth of $1M and an annual income of $200,000), that invest in startups, typically with their own money. Venture capitalists are similar to angel investors, but typically use a pool of money from multiple investors rather than just their own. In both cases they would receive a percentage of ownership of the business in exchange for the investment. You would need a good business plan, and may need some proof of results or proof of concept. With investors, although you are giving up a percentage of your business, the trade off is capital behind your business, and often access to more resources that can help you.
Get a Business Partner
Another way to get investment would be to look for a business partner. Unlike investors, a business partner would typically be a lot more involved in the day-to-day operations of the business. You could require the partner to bring capital in exchange for a percentage of the business. A business partner can be an asset in a startup as there is often a lot that needs to get done early on, and typically no one will work as hard as a person that has ownership. On the flip side partnerships can be challenging to manage at times, and if you don’t have the right partner and a very clear agreement, may cause more problems than it’s worth.
Apply to an Incubator/Accelerator
Incubators and accelerators, like Launch365’s Business Partnership Program, provide investment to startups through grants and seed money. The advantage of being accepted to such a program is that many offer additional resources, direct coaching, and mentorship to ensure a successful start. Most incubators/accelerators require some equity in your business, though some, like Launch365, are based on royalty which means you only pay if you’re getting results and allows you to retain full ownership. Regardless, if you are able to get into an accelerator or incubator, the equity or royalty is well worth the additional help and support you from experienced startup professionals. Accelerators and incubators are often competitive, so ensure you read their application requirements and provide your best work.
Generate and Use Revenue
If you’re unable to secure any significant investment, you can always try to generate some revenue and use that revenue to cover future costs. There are a few different ways you could do this.
Slow and Steady – Start with as much product as you can afford, and sell that, then
use that revenue to buy more product, and so on. Because you’re only buying
a limited amount of product at a time your costs should be minimal, and
each time you should have a bit more money to buy even more product and
generate more revenue.
Advanced Sales – Sell your product before a launch date. Put your initial money into
marketing so that you can generate as many advanced sales as possible, and use that
revenue to pay for your product and fund the rest of your business.
Sell a Non-Core Product – Find other products or services you could sell that could
generate revenue for the business outside your core product. Although this can
distract from your core product and business, many businesses start with a
small product before moving towards their core product.
Although this method of organic growth is typically not the fastest, when you’re unable to secure needed investment, it’s still a great option to get your business going.
Grind It Out on a Budget
Another option, when having trouble securing investment is to grind it out on a budget. If you need to take this approach, your budget should only include what’s absolutely needed to get your business started. Some key things when working with a small budget:
Use low cost services – take as much time as needed to find low cost services that
provide what you need. Though these services may not always be the best option
long-term, they can be great when first starting.
Negotiate everything – don’t be afraid to ask for a discount/lower price. The worst that
could happen is you may get a “no”. If there are parts of the service that you don’t
need, see if you can remove those things for a better price.
Barter for what you need – try offering something other than money in exchange for
the things you need. Maybe there is something that that business needs that
you could provide in exchange for what you need.
Although working on a small budget can also take more time to get going and grow, many successful businesses have started this way.
If you have a great idea for a business, don’t let a lack of money be the restrainer to getting started. Many great businesses have started out with very little to no money. If you’re in the same position use the ways above to get your business off to the races.
Launch365 specializes in training, coaching and mentoring entrepreneurs through business startup and on core business skills. We help many entrepreneurs secure needed funding and startups accepted to our Business Partnership Program can receive up to $10,000 in grants and seed money. If you would like to discuss how we could help you with your business, contact us at: www.launch365.ca/contact-us. To download our business startup guide titled “Startup Success Blueprint” for free go to: www.launch365.ca/startup-success.