As a consultant helping people with their business start-ups, I was always interested to learn about the reasons stopping people from starting their own business. When I ask people whether they want to start their own business, 9 out of 10 say yes. But the reality is that most of them don’t actually take the step and start a business. If you ask them why, the majority will give you one of two main reasons, the first is that they don’t know what business they should start, the second is that they don’t have enough money to start their own business.
If you are stuck on a business idea and don’t know what is the right business for you, you might find it useful to read another article I wrote recently called “Business Start-ups: 10 Steps To Generating Your Successful Business Idea“. If you are stuck because of lack of money, this article is for you.
Statistics show that 80% of new business start-ups fail within the first year, the main reason for that is lack of funding. They spend most of their money up front in developing the product, renting an office, buying equipments and hiring the management team. By the time they’re ready to go to market, they don’t have any money left t0 market their product or hire sales staff, and this is usually when they go bust.
Starting a business can be an expensive and time consuming process. For most of us, time and money are resources we don’t have plenty of. But this doesn’t have to be the case. If you follow the guidelines in this articles, you can start a business with virtually no funding and grow from there.
So, if you need to start up a business and have no funds, or if you’re an employee somewhere and want to start a small side business without risking your life savings or your childrens’ college fund, this article is for you.
1. Pick the right business to start
It goes without saying, if you simply don’t have the cash (either your own or through investors), you won’t be able to start a business that needs a lot of money like building a hospital or opening a new insurance company.
However, there is good news, there are plenty of businesses that don’t need a lot of cash and you can start with little or no funding, you can start your own business sooner than you thought.
The next points will identify the key characteristics of businesses you can start with low funding.
2. Start a business you can do from home
A lot of successful businesses started from home, one very successful example I can think of is HP. If you are low on finances, try and pick something you can do from home and not need a huge space to accomplish. By starting from home, can save you a lot of money that you can invest on other areas of the business, such as marketing or building your product. You can turn one of the spare rooms in the house into an office, get an additional phone line and you’re good to go.
3. Start a business you can do yourself
Use your own skills in the business, look into your capabilities and what you are good at, for example, if you are a web designer or a programmer, it is a perfect business you can start and grow from home and on your own. Think of overheads, if you want to start a business which requires you to employ 5 other people for example, it will cost you a lot more in terms of space and salaries. Try to reduce dependencies on others and focus on your core skills, you can hire others once your business picks up. If you have been in sales for the past 10 years, consider becoming a sales consultant and offer your services to companies that need it.
4. Preferably start a service business
Again here, overheads are critical in starting a business with little financing. Selling a product might involve storage costs, direct costs, upfront investments, delivery costs…etc. Therefore, selling a service like consultation, programming, design, financial advise or whatever your area of expertise is, will have almost zero cost to you, which will make it a much more attractive option for a startup with little funding.
5. Start a business with a short sales cycle
If you sell a product/service that is complicated and has a long sales cycle, like banking software for example, chances are, you will need to hold tens of meetings before you can get an approval or a go ahead, those meetings can span months and might end with no contract. All this time is a cost to you, plus the expenses you need to travel back and forth to your client’s office and all the materials you have to produce at the different stages of the sales cycles…etc. In a nutshell, the simpler the product/service, the easier it is to sell it, the shorter time it takes to complete a sale, the faster you can grow.
6. Minimize face to face contacts
This is closely related to the earlier point about sales cycles. While face to face contact is the ultimate communication medium and selling tool, it can however, limit your numbers. In other words, if you have to meet multiple times with each client face to face before a sale happens, you will need more resources (time and money) trying to close the sale. Ultimately, instead of selling say 100 units a month, you might be limited to selling only 10 simply because of the time you need to spend prospecting.
A practical solution to speed up the process and minimize the time spent closing the sale is to answer all potential questions the client might have in your website or sales literature. If your website and written communication addresses all the key issues the client might have, then when he/she meets you, they have very few questions and are almost ready to make the purchase.
7. Utilize the internet and social media to increase sales
A decent website and a good social media strategy can be all you need to get your business starting and let others know that you exist. Your website is the face of your business, it needs to convey trust and credibility to your prospects. A poorly designed website can limit your chances of successfully selling a good product/service. Additionally, social websites like LinkedIn, Facebook and Twitter are a perfect platform to start building communities and relationships with your target audience and build your own personal brand as an expert in what you do. Thus leading to more sales.
8. First, get your first client
It might be a good idea to test the waters by pitching your product/service to a few clients before you invest further into your business. You can then spend part of the revenue you generate from your first client(s) into the business. This will also give you an indication whether there is a demand for what you are offering, if there is not, then you have avoided wasting your money into something that would not work. If it does work, with time and as you grow your sales, you will have enough money to hire people, rent an office and expand your business.
9. If you fail to plan, you are planning to fail!
In addition to all the points above, you also need to have a clear business plan and targets for your business. The planning process will open your eyes to things you may have not thought of and will help consider the best approach to get your business up and running. It will also help you get focused on your value proposition and align your product/service offering with specific market needs.
10. Collaborate and outsource
There are other professionals and businesses that offer services and products that complement your own and add value to your product offering. You don’t need to re-invent the wheel and build everything from scratch. Build relationships with other experts in your field and work with them in a collaborative environment to produce a better product/service. If you offer sales consultancy to small businesses, it might be a good idea to collaborate with companies that sell sales management software or agencies that design sales literature. By adding these services to your product portfolio, you are giving more value to your client at no extra cost.