Stay Away From Loans and Debts
If possible, donât go into debt to start your business. That means no putting expenses on credit cards, taking out a bank loan or remortgaging your home. Likewise, try to avoid borrowing money from family or friends.
Thereâs something very powerful about the idea of starting a business, but what can you do if money is a major obstacle? Many businesses require significant capital expenditure, and if you donât have the funds to begin your venture, that will be an issue. All is not lost though - with some creative thinking and a slightly different approach, you can âbootstrapâ your business with very little cash.
Bootstrapping is the discipline of starting a business with very little upfront cash. It means you donât typically take out loans or investments or get VC funding. Instead, you rely on limited personal savings and revenue created by your business to grow it. Bootstrapping has created many successful businesses â Dell, HP, Apple and Microsoft all started with very little cash, and now they are some of the biggest companies in the world.
Here at Incfile we know a thing or two about starting a business.
Since 2004 weâve helped over 500,000 business owners, and now weâre here to help you. You don't always need a lot of capital to get a business started. That's why we've put together this guide to starting your own business with low-or no-investment
Read on to find out exactly where to start, what to do next and what questions you should ask to give your new, bootstrapped business the best chance of success. Weâll cover:
Why a lack of money shouldnât stop you
Developing your business model and business plan
What to expect from starting a business
Getting the right legal structure in place
Finding examples of businesses that donât need much money
Complying with rules, regulations and taxes
Maintaining your business
Setting up your business operations
Choosing the type of business to start
Learning the art of bootstrapping
Starting a business is one of the most powerful things you can do. Itâs an opportunity to create unique products and services, bring your ideas to life and create something truly valuable for your customers, employees, suppliers and peers.
A lack of money doesnât stop you doing any of those things.
It might mean you have to manage operations more carefully, pay closer attention to finances, drive your product to market sooner and slow down your expansion plans, but none of those areas alone will kill your business.
In fact, the discipline of founding and growing a business with very little capital will teach you important lessons about financial control, decision making and the art and science of being an entrepreneur. True, some business options will be off the table...but with a little creative thought and a lot of planning and dedication, thereâs every reason you will succeed.
As a new entrepreneur, hereâs what you can expect throughout the lifecycle of starting, running and growing a business with a lack of finances!
You will need to balance time, effort, money and outcomes on a constant basis.
You will need to minimize and strictly control costs. You must manage your finances on a daily basis and quickly build up a financial buffer.
Some of them will have money, some of them wonât. Competition is a fact of life and shows thereâs a demand for what youâre offering.
And they donât all cost money! Although you can pay for professional help, taking part in online discussion groups, meetups and networking events can often get you some good advice for free.
Although you wonât be risking as much financially, you should always spend at least as long researching and validating your idea as you do on setting up your business.
Without the cash for big marketing efforts or customer pushes, you should grow organically and sustainably instead.
You'll make plenty of them; just make sure theyâre not irreversible.
A lack of money is stressful. Until you see sustainable success, expect some sleepless nights.
The type of business you start will be constrained by your lack of capital, but you still have hundreds of options available. Although bootstrapping is a major factor in the type of business you choose to start, there are several other factors at play.
Go into a field you already know something about. Choose a business type that aligns with your expertise and insight.
If you want to run a business for the long-term, think five or 10 years out. Can you still see yourself doing it after all that time? What will success look like to you then?
This part of the process is where you want to spend most of your time. Extensively research and take a deep dive into the various types of business you could start. You could try:
A creative and design business like freelance writing, running an Etsy shop or starting a marketing agency
In-home services like with-no-money, yard maintenance, building, painting or other trades
A professional services business like accounting, real estate, law, architecture or consultancy
Technical businesses like web design and creation or software and development
...and many more
Here are some great examples of business ideas with low investment. There are many other great lists with ideas for low cost startup businesses
You can sell your creative services. If youâre a painter, illustrator, writer or designer, you can make money providing products and services to individuals and businesses. Whether you work on a freelance basis or you sell products, neither needs much capital to set up. You can sell crafted items through portals like Etsy, sell freelance services through Upwork or Fiverr or sell your designs through print-on-demand services like Cafepress or Zazzle.
People always need help around their homes, and theyâre happy to pay for it. You could try dog walking, with-no-money, yard work, babysitting, landscaping and more. Youâll only need to put a little money out for basic supplies; if you're great at your job, youâll soon have repeat clients. If you have a trade youâre trained in, you can leverage that into a business too. You could become an interior designer, carpenter, builder, plumber, electrician or another type of tradesperson.
While most retail requires you to buy stock and inventory up front, you still have a couple of options for getting into ecommerce. Dropshipping allows you to sell products that are shipped directly from manufacturers to end customers - you donât pay until the order is made. You can also get into affiliate marketing, where you send people to another website to purchase something and get a commission on any sales you refer.
You may have other types of knowledge you can turn into a small business. Perhaps you know how to code and develop, or you can design and build websites. You might be a social media expert or a great blogger. You could look into tutoring and teaching. The internet has lowered the barriers to starting knowledge-based businesses, and they are a great place to start if you're low on capital.
If you have insight, expertise and experience thatâs useful to others, you could get work as a consultant. If you have an extensive background in a particular field, think about the type of advice and services other people would be willing to pay for.
The gig economy also provides plenty of opportunity for starting a small business without much capital. If you have a spare room, you can rent it through Airbnb. If you want to drive, thereâs Lyft or Uber. For local tasks, you can try out TaskRabbit or set yourself up as a personal concierge.
There are many other great lists with ideas for low cost startup businesses.
If youâre going to bootstrap your business, youâll need to learn the art of the hustle. Here are some tips for making your money go further, keeping costs down and generating that all-important revenue.
If possible, donât go into debt to start your business. That means no putting expenses on credit cards, taking out a bank loan or remortgaging your home. Likewise, try to avoid borrowing money from family or friends.
Make sure you understand exactly how youâre spending money. Review your finances every day, including your income, spending, cash flow, emergency savings and more. Having a separate business-only bank account can help you see things more clearly. If you donât need to spend the money, donât spend the money.
If you donât have money to hire others, you will need to learn skills yourself. Fortunately, there are lots of great courses, videos, interactive guides and books to teach you almost any talent. Again, you will want to prioritize the areas that will have the greatest beneficial impact on your business.
You need a business model that lets you get your product or service out there as soon as possible. You donât need to be perfect before you launch; you just need to be âgood enough.â Work out what âgood enoughâ looks like, and when you have a product or service that meets those needs, put it into the world. You can always refine and adjust toward perfection later.
A healthy profit margin is essential to your success. Work out exactly how much money goes into the products and services you sell - that includes the base cost, packing, shipping, distribution, customer service and more. It also includes shared costs that your business is responsible for like utilities, rent, software, hardware and other areas.
Only spend money on activities or things that are going to either help you create more revenue or reduce your costs. If an expense isnât going to accomplish either of those things, donât spend the cash. You will also want to prioritize your expenses and put off non-essential spending for as long as possible.
Your business has to make enough money for you to survive, and that means you need to take money out as a salary you can live on. Calculate exactly how much money you need to live, and work that into your business as your minimum salary.
If you need expertise but donât want to do something yourself, look for other small businesses with those skills and see if you can exchange services. Entrepreneurs are often happy to barter - perhaps you can get a designer to build a website for you if you take care of their social media marketing.
All businesses need a business model, which represents the way you will generate sales, provide services and make money. Think about your business model now, because itâs better to have that in place so you can start acquiring customers and generating revenue from day one. This is particularly important when youâre bootstrapping; creating revenue almost immediately is critical.
You will also need to look at financial projections for your business.
What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others? If you can, try to plan your revenue out for the next month, three months, year and two years. Work hard to minimize expenses and maximize profits.
Write a Business Plan for Your Business
Business plans do vary slightly, but they should cover the following areas:
An executive summary with the most important points from your business plan
Your goals and what you hope to achieve with your business
A description of your business, background information and context
A market analysis and likely demand
An overview of how your business is structures
Your business model
How you will market and sell your offerings
Financial projections, revenue and profitability
Appendices
Weâve got the perfect guide to writing your business plan.
Now you have all the background information for your business, itâs time to make it into a reality. That starts by choosing the right structure or âlegal entityâ for your business. In the U.S., there are four main business structures. They are:
This is the "default" business structure and is what your business will be if you decide not to create a more formal structure. We don't recommend this type of business as it doesn't give you the legal protections you need.
The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and is a great way to start your no money business.
This is a special type of LLC entity that's only available in certain states. It allows you to create "mini" LLCs, each with their own limited liability and separate assets, under the umbrella of a master LLC.
This is a more complex type of business and isn't generally recommended for smaller organization.
These are the largest and most complex types of businesses and are far more than the average entrepreneur or business owner will need.
For more information on the advantages and disadvantages of different types of businesses, please see our in-depth guide. If youâve still got questions, weâve answered them to help you choose the right business structure for your with no money business.
In most cases our recommendation would be to create an LLC. Weâve got a complete guide to everything you need to do and we can set one up for your business. LLC formation does vary from state to state, but weâve got you covered, wherever you are.
Start Your Business with Us, Today!Once you've legally created your business, youâll need to get some other things in place.
Setup a location to run your business from. To keep costs down, you will likely start by working from home, a shared workspace or even a coffee shop.
Get the equipment you need to run your business. Ideally you should already have everything you need, but you might be able to beg, borrow or buy secondhand.
You will likely focus on word of mouth and referral marketing in the beginning since itâs low cost and can create good buzz around your business.
Establish the various software and business processes you need to run your new venture in the most efficient, optimized way.
A Clear and Comprehensive Guide to Starting Your Business the Right Way
Of course, along with running a business there are certain rules, regulations and legalities you need to be aware of. You will need to explore local, state and federal licenses and permits, and we can also help out with your licensing needs.
Taxes are a fact of life, and if youâre in business there are various ways you will need to file and pay them.
Let the IRS know you are setting up a business.
If you pay employees, you will be liable for payroll tax.
If youâre selling locally, you may also be liable for collecting and paying sales tax. To register for sales tax, see your Secretary of State website.
Most states do have a state income tax. If yours does, you will be taxed on your earnings as normal. To register for state tax, see your Secretary of State website.
You will need to pay income tax on any profits or earnings you take from your business. In most cases, profits from the business will âflow throughâ to your individual tax return and you will be taxed there.
If you incorporate as a C Corporation, you will also need to pay corporation tax â you will be taxed both on your profits as a business and when you extract earnings from your company. This âdouble taxationâ is one of the reasons we normally recommend LLCs as a good business structure, since they avoid this.
Unlike employees, the earnings from your business will be taxed under a self-employment tax (FICA and Medicaid). This is just over 15 percent of your earnings.
In certain circumstances you may need to pay some other types of taxes. Talk to your accountant to find out what else you may be liable for.
As a rule of thumb, we recommend keeping back around a third of your earnings to pay your taxes. We can prepare and file your tax returns for you
There are certain forms and legalities you need to follow to keep your business in good standing.
Most states require all businesses to file a report once a year. This report has details of any major changes to who owns a business and other major impacts on a businessâ legal status. We can file your Annual Report on your behalf.
Annual ReportMost states require you to have a registered agent on file for your business. This is a party available at a physical address (not a P.O. Box) who can sign for and receive legal notices and documents on your behalf.
Registered Agent ServiceYou will be expected to pay estimated taxes on what you plan to earn in the current business year. You will need to pay estimated taxes in April, June, September and January (of the following year).
You will need to work with your accountant to prepare all the taxes you need to pay.
If applicable, you will need to make payroll and sales tax payments on a regular basis.
You will need to file your taxes once a year.
Your federal, state, regional and city licenses and permits may need to be renewed on a regular basis, typically once a year.
We hope this guide has shown you that starting a business with no money isnât just possible, itâs practical. You can start with nothing and build something unique that will make a powerful difference in your life and the lives of all the people you touch.