Can you start a business without money?
This is Part 3 of a 5 part installment on starting a business.
Can you start a business without money?
In short, yes.
Conventional wisdom says starting a business requires a lot of cash. It suggests smart aspiring entrepreneurs will work as an employees for someone else while setting aside funds until they can afford to start their business.
This is admirable, but unrealistic. There aren’t many wages or lifestyles that would allow someone to make a significant dent in funding a business. The good news is, it has never been easier to a) operate a business with very little money (excluding your compensation), and b) obtain outside funding (for certain kinds of businesses).
If you’re willing to give up some of your free time, it’s absolutely possible to have a side business while maintaining your day job. It’s not easy (or glamorous) but it requires very little investment and can be a great first step to your ultimate dream.
The other option is to raise funds from an investor or lender. As I write this, the funding environment is strong, and raising capital for a decent idea with a strong pitch is relatively easy. There are also more options for funding than ever before: personal credit cards, traditional banks, a variety of next-generation online lenders and angel investors, and venture capital. All of these have upsides and downsides, but it’s all about finding which one is right for your business depending on the industry and what stage your business is in.
More than that, what funding your business really comes down to is your personal level of comfort with risk, and how badly you want to start your business. I’ve laid out a few different mentalities and my suggestion how to fund your business.
Scenario 1: “I’m not comfortable with debt, and my business isn’t sexy enough for an investor.”
If you’re willing to work hard and put in the hours, my suggestion for this mentality would be getting started while simultaneously earning a living as an employee full- or part-time. The key to being successful with this path is not to waste your time on this if you don’t have a clear plan to get 100% to your business.
Without a clear plan to get away from the job that’s providing your startup capital, it’s easy to get stuck doing both, which isn’t your dream and won’t get you there. Have a clear plan and execute on it.
Scenario 2: “I’m willing to do anything to start on my dream. I’ll use my personal credit. I’ll guarantee loans. I’ll give up a piece of what will someday be incredibly valuable if it means I can get started.”
If you have this mentality, you won’t be happy until you’re living your entrepreneurial dream. Give your business 100% of your time and attention, and fund it any way you can. The risk involved in debt or investment will be worth it to you.
Scenario 3: “I’m passionate about my business but not comfortable with debt, and I’m not willing to work two jobs. My family needs me to support our current lifestyle, but I have to scratch this itch.”
This is a tough but amazing spot. It’s awesome that you’re sure you need to scratch the itch, but it’s tough when you need to support a decent quality of life and not assume debt while doing so. Here’s what you should do to be successful in this situation.
You need to develop a quality plan and also prove your concept as you can (demo, website, minimum viable product, etc.). You need to raise funds from an investor who believes in what you’re doing enough to fund the costs of the business and pay your salary. This happens all the time, so don’t worry. But, it will require you to be smart and prepared. You’ll also need to be persistent and have a thick skin — not everybody says yes. Having investors also means giving up part of your business, but if you really have the itch, you are going to have to make some sacrifices to see your dream become reality.
Figuring out how to fund a business can be difficult and messy, but the truth is it has never been easier.
If the itch is strong enough, lack of funding shouldn’t get in the way of starting your business. It’s just a matter of figuring out which method of funding your business works best for your goals and lifestyle.