Plenty of big businesses started small. With funding becoming harder to get hold of and loans more difficult to secure, startups around the UK are finding ways to take off with very little investment. Thanks to the pool of free resources and new marketing channels available to budding entrepreneurs, it’s easier than ever to build a business without huge upfront costs.
However, one thing to remember when starting a business with no money is that you'll really have to put in the graft to get your startup off the ground. Your passion for your business and determination to succeed will have to be the primary driving force, with old-fashioned elbow grease becoming your currency.
So, whether you’ve decided on a business idea or still haven’t chosen yet, our 10 step guide will help you start a successful business that’s easy on the wallet.
1) Analyse What You Already Have
The highest costs that entrepreneurs usually face when starting a business are specialised equipment and rent, yet a successful business can be started with the resources you already have at your fingertips. Consider what workspace you have available; whether that’s your living room, a garage or even office space. Home or web-based businesses such as cake-making or running an eBay store are perfect when cash is tight, or if you have a garage or small workshop you can make or fix products.
Do you have a car or van? The success of companies like Deliveroo and Jinn prove that people are willing to pay for on-demand delivery to their door. Delivery services either for your own products or for other peoples’ are great businesses to start with little upfront costs.
2) Work Around Your Skills
Creating a business around a skill you already have can shred costs off your starting-up expenses. You won’t have to shell out as much for consultancy, you may already have the equipment and you’ll also have a better understanding of the market you’re entering.
Jot down both the hard and soft skills you have. Second languages can be turned into a successful tutoring business, or if you’re good with children, childminding could be an option. Turning a hobby into a business is another low-cost way to start a business since you already possess the knowledge of your product or service and may already have the workspace, knowledge and equipment.
Zopa is the first peer-to-peer lending service in the UK, which allows borrowers to access loans from lenders without extortionate bank charges. The company was started in 2005 by a small team who had previously worked for the bank Egg, meaning they already had an acute understanding of the financial market. This allowed them to target the growing gap in the market for alternative loans as the public’s distrust of big banks grew and grew. The business started small, attracting a young and tech-savvy audience who welcomed the alternate and cheaper way to borrow and lend. Now arranging £420 million in loans, its mainstream success is certainly down to the founder’s knowledge of the market.
3) Choose A Business Which Pays Upfront
A business model that uses lengthy invoices or credit can successfully work if you have enough cash to keep you going until you are paid. If you don’t have a pool of money to keep the business afloat whilst your awaiting payment, it's best to choose products or services that pay upfront. This might mean choosing a less expensive pricing strategy at first, or selling cheaper items until you grow enough to sell higher-ticket products.
Try to avoid the temptation of buying everything you need on a credit card and building debt before you’ve even begun. Use as many of the equipment and skills you wrote down in the previous two steps to avoid buying as much new stuff as possible.
A business that sells products that people need, rather than what people want, is another way to avoid getting into debt early on. Buying stock for expensive items that might take a while to sell, such as technology or motors, can be a slow burner at first compared to less expensive, cheaper items and services such as food, jewellery or tutoring. The more expensive products and services can come once you’ve grown.
4) Turn Fixed Costs Into Variable Ones
What are the usual fixed costs of a business? Salaries, rent, and supplies usually make the cut. However, you can shave hundreds off these fixed costs by only paying for them on an ad-hoc basis, when you need them. Hire freelancers or contractors to support you instead of a full-time employee. People Per Hour is an example of a website that links businesses to freelancers in all sorts of industries. If you’ll occasionally need to host meetings, find a local workspace which rents meeting and conference rooms by the day or hour to avoid the hefty rent.
If you need to purchase supplies, see if you can secure an order before purchasing stock which sits around before you’ve even made a sale. Founders of Apple, Steve Wozniack and Steve Jobs famously created just one personal computer to show to retailers. Once one store saw the pilot product, they placed an order for 50 units. Only then, once intent to buy was shown, did Wozniack and Jobs purchase the materials from a computer parts supplier on an agreed credit basis to make the 50 units. This one big break and shrewd financial planning gave one of the biggest technology companies in the world the start it desperately needed.
5) Utilise Free Advice
Long gone are the days where budding entrepreneurs would have to pay through the roof for expensive business consultants. Local governments and agencies each have their own offering of business advice which is free to be taken advantage of. Furthermore, regional British Chambers of Commerce host events for small businesses and startups that are completely free, whilst Startup Britain offers a wide range of resources and partners to help get your business off the ground.
6) Decide What Essentials You Need To Run The Business
You don’t need a trendy workspace or an expensive website in the first few months or year of your business. Many home-based businesses run successfully from a laptop and a sofa! Strip back to the bare minimum of what you’ll need to make profit. This can be the raw materials, necessary equipment and any computer software which your business cannot, literally, run without.
7) Buy Second-Hand Equipment
Buying cutting-edge equipment straight from the shop is the most expensive way to purchase materials. Good quality, second-hand laptops, office furniture and other equipment can be found at a fraction of the price thanks to websites such as Gumtree, Freecycle and eBay. From sewing machines for a dressmaking venture to furniture for your event business, it’s vital to explore the option of second-hand equipment when cash flow is limited.
8) Build A Business You Can Do Yourself
The cheapest way to start a business? Do everything yourself. Pay with your own time and effort instead of money. Take bookkeeping courses to save on accountancy fees, or take an online law course for Startups to diminish lawyer’s bills. You can design a great website with little web experience by taking advantage of hundreds of free WordPress themes, avoiding paying for a web designer. Obviously, as you grow you’ll want to start outsourcing some of these tasks, but with all the great resources out there successful businesses can easily be started by you alone.
9) Promo Can Be Free Or Cheap
Luckily, there’s plenty of low-cost methods of promoting and marketing your business. Social media, of course, is the obvious way to promote your business for free. Encourage all your family, friends, contacts and customers to interact with your brand across Facebook, Twitter, Instagram and LinkedIn. “Like and share” competitions, where you offer a prize draw to anyone who shares your post, will incentivise people to engage with you on Social Media and will raise brand awareness to their followers. The prize can be a free product or taster session of your service to keep costs down too.
Local networking events are usually free to attend and will allow you to introduce your business to the community. A quick online search in your local area will direct you to the next small business event near you.
To find a local networking event that will suit your business, check out websites such as LinkedIn, MeetUp and Eventbrite. These are constantly updated with new meetings and events in a host of different industries and are a great way to see who will also be attending.
10) Find Alternative Funding
Of course, there are alternative options to raise funds if you can’t launch your business with your own cash and a bank loan is out of the question.
- Crowdfunding is booming at the moment as businesses turn to the public to help raise the money they need to start their business. You offer “rewards” to those who donate, such as a session at your new yoga studio or a free session at your consultancy. Crowdfunder, Kickstarter and Just Giving all help businesses and projects launch every day with the help of public interest.
- Start Up Grants are still available from the government and organisations such as The Princes Trust and CDFi’s. For the government route, check out the Business Finance Support Finder which lists the hundreds of grant agencies which work around the UK.
- Start Up Loans is the government’s scheme to help Startups access the funds they need to get off the ground. You can receive up to £25,000 with an interest rate of 6% which doesn’t need to start being repaid until the first 12 months are over.
It’s clear that with careful planning, shrewd purchasing and (probably) plenty of long nights, successful businesses have more chance than ever to start with little money. We live in a world crammed with free, cheap and most importantly, quality advice which, however, much money you can afford to put into your business, should be taken advantage of. Have you successfully launched a business with no money? Let us know all about how you started a business on a shoestring.