Starting A Business With No Money (or at least with someone else’s)

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More than a few people place little emphasis on the money required to get up and running. Instead, they are focusing on how much money they will be making. There are industries where the amount of capital needed to start up is very low or zero. The other side of the coin is using someone else’s money, either borrowed from friends and family or from a more formal source such as a bank. Each of these has their own set of advantages and disadvantages.

First, you have to determine if startup capital is necessary for your product or service. Products generally require an initial investment, since either you will have to invest in the assembly plant to make the product or you will have to pay someone else to make the product for you. Depending on the size and complexity of the product, initial investment can run well into the high six figure range. Contracting a company to make your product will likely be less expensive, but then your production and delivery times will be depending on someone else. Services can require zero startup investment, especially if you already have purchased the equipment, such as the case of developing computer programs. One thing to avoid with service industries is the immediate purchase of office space or a brick and mortar store. This is a luxury at the beginning and in most cases is an unnecessary expense that significantly reduces your profit.

Another consideration with zero startup funding is how you expect to keep the business running during its infancy. One rule of thumb is to think big but start small. Many people have a job that will pay their basic living expenses until there is a consistent source of revenue from the business that will allow them to commit themselves full time. Thinking big will keep you motivated and working the long hours at the beginning, while not expecting that you will become world famous in six months.

Should you be able to get initial funding for zero percent interest with no set repayment terms, usually from friends and family, these sources are not without their downside. Optimism is great, and support is needed, but stop to consider how these well wishers will respond should your business fail to take off. Yet another rule of thumb is not to go into business with a close friend or family member because of the long term problems that await, whether you are successful or not. There may not be an interest rate or repayment terms to the free money, but the personal capital invested can have a greater impact on your life than paying interest from a more formal source.

Probably the best way to zero finance your business from the beginning is on the Internet. I know that sounds so obvious, but the advantage of using the Web is that most of the tools you need to construct and build your web site are available for free or next-to-nothing. Again, service industry businesses are much more likely to take hold with zero startup capital unless the product is one that you act as a reseller for. Traffic and advertising revenue are two potential additional sources of revenue on the Internet, as opposed to advertising being an expense in the traditional business environment. If you have a general understanding of web development you do not need to learn much more to create a space for your product or service that will cost you nothing.