How to Start a Business on a Lean Budget

Starting a business with little cash is not an easy thing to do. Of course, what constitutes “very little cash” depends on the sort of business you’re looking at; you might have more than enough to open a modest restaurant where you’re at, but that same sum won’t even get you on your feet for a radio station, for instance.

The point is, you’ve got to start up with something. We aren’t going to do a rehash of the old “idea versus money” debate. This writer thinks you’ll need both to get a decent business started, and even more of both to keep it running. That’s not where we’re going with this article.

Instead, we’ll jump right into the thick of beginning an enterprise with a lean budget. Can you grow your idea into a successful business by walking a tight financial rope?

Here’s my answer: it’s doable. There are numerous examples of entrepreneurial triumph wrought through frugality and a no-nonsense approach to deploying resources. Think Larry Page and Sergey Brin starting Google from a garage.

That last paragraph hints at what you should be doing if you’re building a business with thin resources. You’ve got to be ready to make the most of what you have and do so creatively. But this is only a painfully short summary of the very meticulous process that’s required to found and grow a venture with little money. What follows is a more detailed explanation, laid out in ten steps.

1. Have a positive attitude

This doesn’t fit into your typical business advice, but it’s a very important ingredient for running a new business on a lean budget. If you start out thinking only about how difficult the process is (and, boy is it difficult!), you may get worn out by the very difficulties you feared, and give up eventually. But when you’re confident that you can make it through the tight times, you’ll be more likely to surmount the odds.

In summary, it’s all in the mind.

2. Pursue your most commercially viable idea

This is sort of a caveat to the first point and a really crucial one at that. In fact, it comes first. Being confident about an idea that doesn’t have any prospect of generating income on a regular basis is really just being foolhardy.

A business idea is commercially viable if it meets a real need (or needs), and if the people whose need it meets value it enough to pay to get it. If your business fits this description, it may be worth sweating it out on. If it doesn’t, it’s not going to work- whether you have the cash to run it or not.

3. Be creative

You’ll have to come up with ways to use your scarce resources in the most efficient manner. Thankfully, there’s a lot of information that you may find useful for this purpose. Just be sure to apply them in ways that suit the peculiarities of your situation.

Learning new skills could also help you manage costs. For example, you might need a website for your business, but don’t have enough to hire a web developer. There’s a way out: you could just learn how to create a website and save yourself some money. Admittedly, this will take time; but then it’s up to you to decide if the money saved is worth more or less than the time you’ll give up to get it.

4. Seek external funding

When you don’t have enough money to start or sustain a business, you’ll need to get it from some other source. There’s the family and friends option, which is the most frequently sought and (on the average) the easiest way to get financial help from without. There are also more formal options, such as banks, angel investors, and venture capitalists, who might be willing to fund your business in exchange for a profit yielding stake in it.

Have your business plan in place. Know the market you’re getting into. Research your competition. Ensure your solutions are water tight. These are the elements you’ll require to make the perfect pitch to potential investors.

5. Go out into the open

Let’s say you’re taken in by the idea of external funding. How do you link up with someone who might be willing to support your business financially?

Networking events offer a big opportunity for businesses to connect with potential backers. The good thing is, there’s more of them being held these days. Trade events and business conferences provide the sort of environment that makes such meetings possible. But don’t neglect other possible chances as well; basically, you should consider any social situation in which you’re likely to meet up with potential investors as a chance to pitch. Wherever you go, have your sights set on marketing your brand.

In simple terms, always be pitching.

6. Get a partner with the means

You may go one step further than courting external funding, to actually teaming up with people who have the resources your business needs, and are looking for partners who already have viable ideas or businesses. Just as is the case with seeking investors from outside the business, you could find these possible partners through business oriented events or social settings in which these people may frequent. You could also ask your existing contacts to be on the lookout for one on your behalf.

7. Don’t start out with costly rent

There could be a temptation to kick off operations from a proper office space, especially one that’s in or around a high income area. Don’t yield to it, unless you have what it takes to pay the rent and meet other financial obligations without going belly up in the process.

Go for a smaller space that you can afford, something that doesn’t burn a hole in your account. You may even begin at your home if the nature of your business permits this. Start with a low cost work space, and use it until you have enough to get a bigger, better one.

8. Use co-working spaces

Co-working spaces are a great way to kill several startup problem birds with one stone. They’re usually less expensive than standard office spaces, but let you have much of the utility that comes with the latter. You could benefit the expertise of the other businesspeople working from those locations, and make valuable connections as well.

Some co-working spaces also have incubator programs, designed to assist budding startups with the technical help and mentorship they need to scale. You might benefit from this sort of program if you’re part of a co-working community.

9. Obtain equipment on the cheap

It may take more time to find the least expensive options of the quality equipment on sale than you would spend if you were just looking for “good” equipment on a regular day. You may have to give that time to the cause. There’s some advice on how to get this done here.

You may also rent equipment if it’s a less expensive alternative to outright purchase.

10. Plough back profit

When your business finally begins to make profit, you should devote some of that amount to growing it. Ploughing profit back into the business is a way of weaning it off external funding, and building it into a self sustaining entity.

Feature image: dynamicbusiness.com.au

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ikenna-nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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