What do you need to know when starting a business with no money?
This is a great question that I tend to get in emails from time to time.
The answer to that question will likely differ from person to person depending on their specific circumstances. However, in most cases, I’ve found that people who typically ask questions like this have a some what similar situation and could likely apply a some what similar strategy to start their own business.
With that being said, here are a few things that you need to know to start a business with no money.
Should I quit my job to start my own business?
No.
Unless you have experience in business, have a lot of money saved up, and have your personal finances under control, you should probably not quit your job to start a business.
The truth is, in every situation, starting a new business comes at some cost. In other words, it’s pretty much impossible to start a business with no money.
The trick for a person in your situation, however, is to create a transition strategy that allows you to keep stability in your life.
This is no easy task.
In order to keep stability in your life, it’s important that you have a good understanding of the following:
- High risk investments = High rewards
- High risk investments also mean you have a higher probability of failure.
- Higher probability of failure = Higher probability of instability
- In other words, if you want to make a smooth transition into starting your own business, you’ll likely have to start one that doesn’t make very high profit margins.
Can I start my own business while employed?
This is a tricky question and is best answered by an attorney.
A friend of mine recently conducted an interview with startup attorney Doug Bend. If you have a few minutes, it’s definitely worth watching.
Here are a few key points that I found particularly interesting:
- Your approach matters – Doug mentions that you basically have two approaches to starting a side business; to be honest with your employer or to start a side business in “stealth” mode. I definitely agree with Doug here that the best approach is typically to be open and honest with your employeer.
- Don’t compete with your employer – When starting your own business, it’s important to put yourself in your employer’s shoes. What type of business would your employer be okay with you starting? The obvious answer is one that isn’t a threat. Be sure to consider additional ways that you may be competing with your current employer.
- Flexibility is key – As I mentioned before, you’re going to have to be very careful in terms of what type of business you start. When starting your own business, you never, at any point, want to disrespect or take away from your current employer. This means that you won’t be able to take care of business while working your day job. In other words, you’ll need to be able to take care of your side business some other way.
- Consider your employment agreement – This was probably the most intriguing portion of Devesh’s interview to me. In some situations, an employer can come after your side business. You need to make sure that you read the details in your employment agreement. If you’re serious about starting your own business, don’t be cheap here and avoid an attorney.
What do I need to know about side business taxes?
If you’re like me, just the thought of accounting makes you want to fall asleep.
It’s important to remember, though, that business is numbers game. If you fail to get the numbers right, you fail all together.
Just like an attorney, an accountant can help you lay out the best strategy to help your business grow the fastest. These strategies should ultimately be tailored to your specific circumstances.
If you don’t have an accountant, I would recommend reaching out to Mark Ryan (tell him I sent you).
Here are a few questions you’ll want to ask him in regards to your side business taxes:
- What’s the best tax strategy for my current situation?
- How would I go about filling taxes for my side business?
- What tax deductions would be realistic if I started my own business?
- Is it possible for you to take care of all of this stuff for me? (<—my favorite question to ask Mark) 🙂
- If you plan on doing work as a freelancer, be sure to ask him about the tax rules for freelancers also.
How can I start a side business with low investment?
Rather than asking how to quit your job in order to start a business with no money, consider asking yourself, “how can I start a side business with low investment?”
Considering everything we mentioned above, here’s one possible approach for you to consider:
- Determine the best business to start – In most cases, the best side businesses are flexible, require low investment, and can be completely automated. Even if it means you make little profit margins, find a business that incorporates all of these characteristics and allows you to build stable streams of recurring revenue. Having steady streams of revenue will make it much easier to transition over to your business full time.
- Layout a business plan – Some people like to argue against writing a business plan because the business environment changes so fast they are afraid that you’ll get left behind. I disagree. Writing a business plan is about you thinking about a major move before actually doing it. That’s business 101. Write, at least, a rough draft of how your business will work and how you plan to make progress.
- Consult the professionals – Once you’ve laid out your business plan, reach out to professionals like Doug and Mark to make sure that you are ready to start your own business. Ask them to help you take the steps to legally start your own business.
- Outsource everything – Once you’ve legally launched your business, you need to start outsourcing all of your work. In your business plan you should have listed out the vendors you were going to use and contacted them to make the arrangements. Remember, even if it means you are making small profit margins, the idea is to build up a recurring client base.
- Automate everything – Likewise, you need to streamline your business operations to take care of the tasks that you can not outsource. For example, try to setup your accounting to automatically invoice clients each month via email and only accept automated credit card payments. With accounts payable, setup your bank account to automatically send out payments each month. This will save you a lot of time and will make sure that you are being paid on time.
- Make the transition – By now you should have an understanding of how much money your business will need to make in order for you to make the transition to your side business. It’s very important that, when making this transition, you don’t leave your current employer hanging. You need to take care of them and give them plenty of time to fill your current position. Make sure that you ask the question of what you can do to help make the transition smoother for them. When you go to make the transition, the idea is that you will be taking back your operations from whoever you were outsourcing them to. It’s important here, too, that you don’t leave your vendors hanging. In all reality, you will likely need to work with them for a period of time before you are able to hire in-house staff.
Conclusion
While this strategy would likely work for quite a few people, it’s important to remember that it may not work for everyone.
If need be, don’t hesitate to reach out to someone who specializes in something like this. Make sure that you consider your specific situation and how it may differ from what I mentioned above.
For those of you who have successfully started a business, what advice would you have for those who may be considering starting their own business?