When you hear the word “startup,” it’s easy to envision the hottest up and coming companies in Silicon Valley vying to snag financing from venture capital firms. However, not all startups require millions of dollars in funding to get off the ground. In fact, according to the Small Business Administration (SBA), many micro-businesses can get started for as little as $3,000 or less. These businesses are often home-based sole proprietorships that require low, upfront investments. Another option is a franchise. While the average franchise may require a more substantial investment, home-based franchises can be started with as little as $1,000-$5,000. If you have a great business idea, but you’re wondering how to finance it on a shoestring budget, here are some tips to keep in mind.
In the early stages, don’t invest too much up front if you don’t have to. It may be tempting to spend thousands of dollars on a beautiful new website or logo, but the reality is that as time goes on, you will need to make adjustments along the way. Keep your overhead, inventory, and labor expenses low. Make every dollar count and ask yourself this question before you are about to spend any cash, “Will this help me acquire new customers and contribute to my bottom line?” If the activity doesn’t help you grow your business, skip it. Also, test your idea to ensure that you do indeed have a market for it. Create focus groups consisting of your target audience and find out what their needs and pain points are. You can also take advantage of online survey tools like SurveyMonkey to solicit feedback. Cynthia McCahon, founder and CEO of business plan software company Enloop, says that,
“The best approach is to test your idea in a small, inexpensive way that gives you a good indication of whether customers need your product and how much they’re willing to pay for it. If the test seems successful, then you can start planning your business based on what you learned.”
Keep it simple
When you incorporate your company, keep it simple. A limited liability corporation (LLC) can be formed in most states for less than $100 online without legal assistance. This will keep financial and legal liabilities away from your personal assets and is less complex than a C-Corp or an S-Corp. You can even use sites like LegalZoom or IncFile to help streamline the incorporation process. Writing a business plan can be daunting, so start with a one-page document (also sometimes called a Lean Business Plan). This will allow you to save time and it’s an easy document to share and get feedback from business partners, friends and family. You can even use this simplified template to build multiple business plans as you try out different ideas. Consider working out of your home to avoid renting office space. You also don’t need an accountant right away—an accounting package like QuickBooks will do just fine. If you do need outside help, consider freelancers and virtual assistants rather than full-time employees. In terms of marketing, look for cost-effective ways to promote your business online using social media and don’t hire outside experts until you are generating revenue.
If you start a business on a budget, it’s unlikely you will have substantial marketing funds. This is the time to leverage your personal and professional networks to get the word out. Be creative. Use social platforms like Twitter, Facebook, LinkedIn, Instagram and others to the fullest. Reach out to your contacts to see if anyone would be interested in pre-ordering your product. This will give you some valuable initial feedback around pricing and potential demand. Find creative ways to score media coverage. One idea is to sign up with Help a Reporter Out, or HARO, as it is typically referred to. This free platform connects journalists to industry experts and will allow you to present yourself to reporters, bloggers and others as a reliable and responsive source. Create a blog. Blogging is a powerful strategy that can help your company generate valuable exposure. One study found that businesses with blogs generate 126% more leads than their competitors without blogs. A blog can help you position your startup as a thought leader while also attracting organic search traffic to your site. Email marketing is still the most cost-effective way to promote your product or service. Once you collect a prospect’s email address on your website, you will be able to nurture them over time with valuable content.
Starting a business with minimal financing is challenging, but it can be done. There is not a direct correlation between the amount of money you start with and the chances of your business succeeding. In fact, sometimes having too much starting capital is worse because it gives the early appearance of success and leads to wasteful business practices. By starting lean, you’ll maintain a more disciplined approach as your business grows. The habits you learn while bootstrapping your business will serve you well as you take your company to the next level.
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