Obtaining enough funds to finance their businesses is one of the biggest concerns and fears for many entrepreneurs and small business owners. In fact, in our recent survey of small business owners planning to attend our upcoming online Small Business Boot Camp, 100% stated that “running out of cash” was one of their biggest concerns and fears – hands-down the top response in the survey.
Small business loans are becoming increasingly hard to come by, so it’s no wonder that financing is on the top of everyone’s minds. A weak economy, reluctant banks, and even the US Small Business Administration scaling back on government-backed small business loans are all contributing factors to these challenges.
The good news is that it is easier than ever to create a startup without excessive capital needs. The internet, technology, and new ways of thinking are all making it easier for entrepreneurs to start a business without breaking the bank.
Below are just a few examples of how an entrepreneur can create a startup with very little to no startup capital or small business loans:
Avoid capital-intensive industries. If you are planning a business that requires large investments of money in technology, real estate, inventory, or hiring employees, then you will absolutely need significant cash to get started. However, there are plenty of opportunities outside of these areas that do not require as much cash. For example, internet-based companies are increasingly popular options for startups on shoestring budgets, especially if you have a strong technical background.
Don’t worry about perfecting your product or service before launching. Many entrepreneurs feel as though they need to get their product or service just right before launching it. There are two problems with this approach: 1) you have no way to know what “perfect” means until you’ve tested things out with potential customers, and 2) you are much more likely to run out of cash and momentum if you take too long to develop your product. Instead, look for ways to simplify, streamline, and get a basic, initial version of your product or service to the market.
Test market your idea early before committing more money. Once you have a basic product or service in place, test your product with potential customers, solicit feedback, and tweak your offering accordingly. You will inevitably find that there are some good things about what you’ve developed, while there will be aspects that could be improved. This market test will serve as a good litmus test to determine how viable your product or service is – and whether you think you can make money off the venture – before investing more money into the venture.
Develop multiple revenue streams early. Where possible, looks for ways to sell different variations of your product or service, either to the same or different customers. This will help ensure that you don’t put all your eggs in one basket and are able to generate more revenue more quickly. For example, one startup that we recently worked with provided a number of different wellness and fitness services to different customers, including corporate wellness, personal training, and laser therapy. During the earliest days of this particular small business, laser treatments and personal training subsidized much of the business while it ramped up demand for its even larger long-term revenue potential within corporate wellness. It also provided this business the opportunity to cross-sell additional services to its early customers.
Don’t quit your day job. Perhaps the best way to limit your startup capital is to keep your day job while you work on the startup. Although many feel the need to quite their day jobs in order to start a small business, it simply isn’t practical for most. Having a steady paycheck (and a potential source of money to sink in the business) can provide a great deal of runway while you test your business and get it off the ground. It’s also a great way to diversify your risk by ensuring that you don’t prematurely go “all-in” on your new business venture without testing it first.
These are just a few of the ways that we’ve seen entrepreneurs limit their startup financing needs and dependence on potential small business loans.
Learn more examples by attending our free online Small Business Boot Camp training course.