First of all, I just want to say: WOW! I am overwhelmed to see almost 1000 people responding to Guide My Growth asking for advice in just a few days. Thank you for your trust in me.
Many of you are asking me how to start a business with limited funding or how to get funding to start a business. I am also seeing questions about how to expand your business with limited funding, and clarification on how banks make money. There are also many other questions.
So today, I will address how to start a business the official way when you have limited funding. Next week, I will show you an alternative way. And after that, I will give you a list of 31 best business ideas that can be started with limited investments.
If you are waiting until somebody gives you money to start your business, maybe you should ask yourself whether you should actually become an entrepreneur.
Money or no money, a true entrepreneur will find a way to start. They will find a way to start with 1% of their business vision. They will not wait until somebody gives them money to be able to start with 100% of their vision. But they will find a smart way to start.
The bad news is, there is no easy way to get money unless you have a rich family member or other person that likes you so much they are willing to support you. The good news is, there is an approach you can take to build a business without having much money. This approach is to find a gap in the market, look for a business that does not need a lot of money to start or run, maximise your sales, control your business and do not let yourself be distracted. So let us take a closer look.
Step 1: Look around. Where is the market need?
What is happening on the market around you? Is everybody selling the same things? What are those things that customers are asking for but businesses are not selling? Are customers complaining about the way they are being treated? Is the quality of what is on the market lacking and is that something you can improve on?
Many times, you will see people starting the same kind of business that is already active because other people are selling and making money. And then they end up having to compete by offering very low prices because there is other way to make the customer keep coming back to you.
So your first step will be to study the market around you to find the gaps. Make sure to look beyond the kind of business you like. Pay attention to where can you generate money?
Step 2: Look for a business that doesn't require much money.
The official way to say this is that your business should not be “capital intensive”. What business can you start with 100 USD or even 50 USD? If you say your business idea requires 2 000 USD or even 50 000 USD to start, is there any way you can break it down so you can start small? What are those things that are absolutely necessary to start the business? When you have defined them, focus on how you can reduce the startup cost. For example, can you and somebody else buy what you need and then share? (Make sure to have good agreements in place about how to share!)
Once you know how much limited funding you need to start, you can then save the money until you have it. If you have a job, keep it and try to save small amounts. Or try to get money from friends and family by offering them something in return. For example, can you offer them a 10% discount for 2 months after starting the business?
Of course, you can spend time looking for grants, but note that a grant will require you to write and submit a business plan proving that the business will be profitable. As for loans from banks, the bank will want to see that your business is already making a profit before they give you a loan. Some banks may require you to have been in business for 1 year before they will consider you for a loan. And then also the interest they charge can kill your business! It is left with you to decide whether this is the best approach for your business.
Step 3: Look for a business that is not expensive to operate.
For this, you need to understand the business you are looking into. What are the daily, weekly and monthly expenses to run the business? Will the business have to pay your rent, your food, your children’s education? Does the business have to do so from day 1, or do you (or your partner?) have other income? I recommend to keep your business separate from your personal finance, but I understand that not everybody is able to do this. If you do not separate them, please make sure to keep good financial records. This will tell you if the business is doing well (but your personal expenses are eating all the profits) or if the business is actually a failure. It will help you determine whether or not to continue the business.
Once you know all the costs, study them very carefully. Where can you cut costs? But please, do not reduce quality unless you don’t want customers. When you know all your expenses, calculate how many products or services you will need to sell per day, per week and per month. And then be truly honest: are you able to make this amount of sales?
Step 4: Sell, sell, sell. And give great but smart customer service.
If you have studied the market well (step 1) you will know what customers are looking for. But how will your future customers know that you are offering what they want?
- First of all, tell everybody that you know and everybody that you meet what you are selling. Be a walking & talking billboard for your business but don’t spend money of t-shirts or calling cards at this time.
- Can you offer discounts to promote the business? If the profit margin is high, you can offer discounts to the first 25, 50 or 100 customers who buy from you. Or, you can offer discounts for customers that come back to you business for the 2nd time or the 3rd Can you give discounts to the people who bring in new customers?
- You can also use social media in a smart way. You can create a Facebook business page and use free design tools to create online promotions or discount coupons. You can then share these through your business and personal Facebook page to promote your business. You can even use them to increase your customers, for example by hosting a giveaway for people who buy from you and leave their contact details.
- Also look at your competitors. If you start the business, can they easily copy you? Maybe you are thinking you will be able to sell your product or service for a certain amount, but if your competitors can match your price, is there something else that will still set you apart and allow you to charge a higher price?
- Make sure to offer the best customer experience and customer service that you can provide. Customer service is often lacking, so this one way to build a good reputation and retain customers.
Step 5: Control your business.
To control your business, you need to know how your business is doing in all aspects. Particularly regarding expenditure. As you do your best to increase sales, also do your best to keep your costs and expenses as low as possible as this will increase your profits.
Cash is king! So please try to limit credit to your customers! Or at least only offer buying on credit to those customers that you know will pay you. But if you do want to offer credit, understand what it will mean for your business. How long – on average – does it take a customer to pay? During those days, can you make additional sales to cover the lack of income? If not, do you have savings that can carry you until the payment is received?
Educate yourself about how to manage a business. Learn how to do basic bookkeeping and administration, marketing, customer service and cost management. This knowledge will help you no matter the size of your business, and it is absolutely necessary if you want your business to prosper. Note: if you keep following this blog, you will get access to education about most of these topics.
Entrepreneurship = sacrifice. Are you willing to sleep less hours or sacrifice your Sunday afternoons to work on your business? To spend less time with friends or watching tv so you can learn how to improve your management of the business? To put all your profits back into your business? As former US president Thomas Jefferson once said: “If you want something you have never had, you must be willing to do something you have never done.”
Step 6: Repeat the above. Don't allow yourself to get distracted.
Do not be fooled by people promoting “Get rich quick” opportunities. Usually, the only people to benefit from those opportunities are the ones that are trying to convince you to try it. Any business person who did well, unless they got their money by illegal means, will tell you that they worked hard, sometimes for many, many years, before getting to where they are today.
You may not have a lot of money to start, but if you are determined and are willing to sacrifice your time, you will start to see results.
What is your business struggling with today?
Do you think this advice will help you to start your own business with limited money? In what areas do you need additional advice? Click the button under this post to tell me, and I will answer your questions in future blog posts. Also, don’t forget to Like our Facebook page so you can join our discussions.