Last week, I wrote about one way to start a business when you have limited money available. That approach, the official way, consists of the following steps:
- Find out the gap in the market
- Look for a business that does not require much money to start and operate
- Maximise your sales and give the best customer service you are able to give
- Control your business
- Grow you business by repeating the above steps and do not let yourself be distracted.
Today, I want to show you another approach you can take. Next week, I will give examples of businesses that can be started with very limited amounts of money.
The other way to start a business with little money
In this approach, instead of looking around you to determine the need in the market, you start by looking at yourself. Ask yourself these 3 questions:
- What can you do well?
- Who do you know?
- How much money are you willing to lose to test the business?
Step 1: What can you do well?
The idea is to get a clear understanding of something that you know how to do well. Or at least, better than the people around you. My advice is to take some time to really think about this and to write your ideas on paper. When you put in some effort, the results that you find may surprise you.
When you ask yourself this question, focus on these 4 areas:
- What skills have you learned that you could use to start a business? Let’s say there is this guy who is really knows how to bring a lot of people to social events.
- How about your experience so far? What have you done in the past years that you were good at? So for this same guy, maybe he was a class leader in school or at university, or maybe he did some administrative work at a company.
- What knowledge have you gained? For example, let’s look at this guy again and say he is good in maths or maybe he can write really well.
- What resources do you have and what resources can you access? So maybe this guy has a bicycle, a mobile phone and internet data. And in addition, maybe his mother has a baking oven.
Based on the above example, this guy could come up with the idea to start a party business where he organizes social events for a small fee. And he can hire his mother to do some of the catering at the event. (If his mum is smart, she will charge him!) Since he is good in maths, he will be able to calculate the cost of organizing such an event, and he will also know how much to charge so that he can make a profit. He knows how to write well and he has a phone and internet data. This means that he can use online design tools to create flyers and advertisements. No need for him to print them; he can share them with all his friends on Facebook. If he offers a discount or giveaway, he may even be able to convince his friends to re-share the post so that even more people will see it. And of course he himself will do the running around to tell everybody about his new business.
Step 2: Who do you know?
That brings me to the second point: who do you know? I already touched on this in step 1. This guy that we are using as an example, he has his friends and family members plus the people living in his community. I’m sure he also knows a lot of people at his former school or university, or maybe at the place he use to work or through his football matches. How about friends of friends and friends of family or community members? How many people do you think he can reach with his word-of-mouth or basic Facebook marketing?
If you take the time to sit down and think about it, you may find that you know many more people than you are aware of. How is your relationship with these people? How could they help you to promote your business? If some of these people also have a business, is there a way for you to work together for mutual benefit? For example, maybe this guy with the party business can work with another guy who has a great music set.
A word of caution: if you decide to work with other people be very clear about how much you will give them as compensation. Whether it is a fixed fee or part of the profit from the event. This will help to avoid misunderstandings. My advice is to also be fair. If this guy is expecting a huge profit from an event and he negotiates to pay only a small fee to his friend with the music set, he will profit in the short run and consider himself very smart. But if word spreads, people may not be willing to work with him and this may stop his business from succeeding.
Step 3: How much money are you willing to lose to test the business?
This is a test of your entrepreneurial mindset. :-) If you say “Nothing”, well, entrepreneurship by definition equals taking risks. If you say “All my money”, well, entrepreneurship also equals making smart decisions.
To answer this question, you first of all need to know how much money is needed to start the business at minimum cost. See my post from last week for some advice about how to do this. Secondly, you need to be able to raise the money. If you have savings, ask yourself what part of that money you are willing to lose to test your business. Then use that money to start and put in as much effort as possible to make it a success.
If you do not have savings, can you reduce your expenses to save money? Maybe walk farther instead of taking transportation. Can you do some errands or small jobs in the evenings or weekends to make some extra cash that you save for starting the business?
Forget about bank loans for now. Banks will only give you money if you can prove that the business is making a profit and will continue to do so. Besides, if you put all your effort into getting loans and they turn you down, you will have wasted your time. Imagine what you could have achieved if you had put all that effort into your business! You can check out this post to learn more about the various sources of funding.
Step 4: Experiment and adapt
Once you start your business, it will require you to keep trying different things to find out which of them is best. This means that you will have to keep experimenting. And as you experiment and learn, you will also need to keep adapting. At the end of the day, if you, the entrepreneur, can adapt based on the opportunities you see and what you are able to do, if you can put in the effort to run the business and learn to manage it while also keeping your costs as low as possible, you will see positive results come from your efforts.