How to Start a Business With (Almost) No Money

On the surface, this seems like a major problem, but
a lack of personal capital shouldn’t stop you from
pursuing your dreams. In fact, it’s entirely possible to
start and grow a business with almost no personal
financial investment whatsoever -- if you know what
you’re doing.

Why a business needs money
First, let’s take a look at why a business needs money
in the first place. There’s no uniform “startup” fee for
building a business, so different businesses will have
different needs. It’s important to first estimate how
much you need before you start finding alternative
methods to fund your company.
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Consider the following uses:
Licenses and permits. Depending on your
region, you may need special paperwork and
registry to operate.
Supplies. Are you buying raw materials? Do
you need computers and/or other devices?
Equipment. Do you need specialized
machinery or software?
Office space. This is a huge expense, and you
can't neglect things like Internet and utilities
costs.
Associations, subscriptions, memberships.
What publications and affiliations will you
subsribe to every month?
Operating expenses. Dig into the nooks and
crannies here, and don’t forget about
marketing.
Legal fees. Are you consulting a lawyer
throughout your business-development
process?
Employees and contractors. If you can’t do it
alone, you’ll need people on your payroll.
With that said, you have two main paths of starting a
business with less money: lowering your costs or
increasing your available capital from outside
sources. You have three options here:
Related: Starting a Business in 2016? Avoid These
5 'Beginner' Mistakes.
Option one: Reduce your needs
Your first option is to change your business model to
demand fewer needs as listed above. For example, if
you were planning on starting a company of personal
trainers, you could reduce your “employee” expenses
by being the sole employee at the start. Unless you
need office space, you can work from home. You can
even do your homework to find cheaper sources of
supplies, or cut out entire product lines that are too
expensive to produce at the outset.
There are a few expenses that you won’t be able to
avoid, however. Licensing and legal fees will set you
back even if you cut back on everything else.
According to the SBA, many microbusinesses get
started on less than $3,000, and home-based
franchises can be started for as little as $1,000.
Option two: Bootstrap
Your second option invokes the idea of a “warmup”
period for your business. Instead of going straight
into full-fledged business mode, you’ll start with just
the basics. You might launch a blog and one niche
service, reducing your scope, your audience and your
profit, in order to get a head-start. If you can start as
a self-employed individual, you'll avoid some of the
biggest initial costs (and enjoy a simpler tax
situation, too).
Once you start realizing some revenue, you can
invest in yourself, and build the business you
imagined piece by piece, rather than all at once.
Option three: Outsource
Your third option is all about getting funding from
outside sources. I’ve covered the world of startup
funding in a number of different pieces, so I won’t get
into much detail, but know there are dozens of
potential ways to raise capital -- even if you don’t
have much yourself. Here are just a few potential
sources for you:
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Friends and family. Don’t rule out the
possibility of getting help from friends and
family, even if you have to piece the capital
together from multiple sources.
Angel investors. Angel investors are wealthy
individuals who back business ideas early in
their generation. They typically invest in
exchange for partial ownership of the
company, which is a sacrifice worth
considering.
Venture capitalists. Venture capitalists are
like angel investors, but are typically
partnerships or organizations and tend to scout
businesses that are already in existence.
Crowdfunding. It’s popular for a reason: with a
good idea and enough work, you can attract
funding for anything.
Government grants and loans. The Small
Business Administration (and a number of state
and local government agencies) exist solely to
help small businesses grow. Many offer loans
and grants to help you get started.
Bank loans. You can always open a line of
credit with the bank if your credit is in good
standing.
Related: 5 Mistakes to Avoid When Starting Your
First Business
With one or more of these three options, you should
be able to reduce your personal financial investment
to almost nothing. You may have to make some other
sacrifices, such as starting small, accommodating
partners or taking on debt, but if you believe in your
business idea, none of these losses should stand in
your way. Capital is a major hurdle to overcome, but
make no mistake -- it can be overcome.