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Tips for starting a business with little money

Could you start without money? Yes, but if it is already difficult to do it with resources, starting without money would multiply your problems exponentially. After speaking with different experts in business creation and development, don’t forget these recommendations.

Tip #1

First of all, lean startup mentality , which in a nutshell is: look for a problem, find a solution, go to market and test it as soon as possible . And then, as you iterate your solution with market feedback , modify it and adapt it to the real needs of your clients. And all that, managing the resources you have very well. Two classic manuals will be very helpful to you: The Lean Startup Method , by Eric Ries , and The Entrepreneur’s Manual , by Steve Blank and Bob Dorf .

Tip #2

Don’t start without money. How much? Well, it will depend on several factors, because opening a physical store is not the same as selling products online or offering your services as a professional. Depending on one option or another, the amount of resources you would need to undertake safely would be greater or lesser.

Tip #3

It is important to know how much money you have and how much you can use. Just because you start with few resources does not mean that you do not keep track of your accounts. We recommend that you do numbers before starting and also after opening the business. In the first case, it will help you know how much money you will need to get started, and if you don’t have it, look for it. And in the second, how much money for daily life. This way, you will avoid getting stuck when the first unforeseen events arise. Which, rest assured, there will be.

Tip #4

Calculate how much you will need to get started. As Jordi Altimira , CEO and partner of UpBizor , assures, “it is essential to have a lean philosophy , very bootstrapping . If you can start developing your activity with the minimum possible assets, you will need less liabilities. And the less liabilities you need, the less financial needs you will have. Anything that involves varying costs is a good strategy. And that’s what it’s all about, reducing fixed costs as much as possible. For example, if you can avoid needing a premises or an office at the beginning, that will save you. But, if due to the very nature of your project, you cannot do without certain fixed costs, try to vary them. For example, instead of having a store, look for a small warehouse to store products. Or instead of having your own office, go to a coworking . And until you can hire staff (another classic fixed cost), look for alliances and agreements with other entrepreneurs like you that complement your business.”

Tips for starting a business with little money

Tip #5

We have already said that the amount you will need to start will depend on as many factors as the characteristics of each business model : product or service, online or offline , if it requires personnel, if it needs its own manufacturing, if it outsources its services, depending on its business model. generation of income, depending on the market payment conditions…

Imagine that your business will be physical. In that case, the initial rent and deposits for the premises. Without forgetting that there are cases in which the owner of the premises will require two or three monthly payments in advance. And if the premises you are going to move into requires prior renovation, also add the technical report of the construction project, the construction and opening permits and licenses, and the civil works. Sometimes, you will also need to have endorsements and guarantees to cover possible risks.

It is also important not to forget about the VAT on the investments you are going to make. Likewise, the costs related to the supply of the premises (machinery, decoration, furniture, etc.). Also the initial stock that you will need so that the store has products to sell. You will probably need to have a computer management system.

Also very important, you will have to invest in some type of initial advertising to make yourself known. Without forgetting the investment in the development of a website . Of course, the costs related to the constitution of the company and the initial management expenses. From here, other more specific items related to the sector in which you are going to operate may arise.

Tip #6

All of this you will need to ‘open’ your business. And to that you will have to add other items for day-to-day management. For example, the famous working capital, which, broadly speaking, is the difference between the money you are going to earn from the sales of your products and/or services and the money you are going to spend that month (the usual currency) so that the business can continue to move forward. This fund must cover, at least, 3 or 4 months of expenses. Although depending on your market, with payment and collection terms in the medium and long term, this working capital may be larger.

You must also include the periodic rental of the premises. One of the most important items is personnel expenses, if you need to have employees. In it, you must include not only salaries, but also social security. Also, the expenses of being self-employed such as salary, administrative and quarterly VAT. Of course, the different insurances of the premises and those specific to the activity of your business. Without forgetting, the cost to have a permanent stock of products.

Also, various supplies such as stationery, etc. Or those related to the maintenance of the premises (electricity, water, telecommunications…). And other expenses related to the business’s own activity such as logistics, for example. Also an item destined for marketing and advertising expenses. Or the costs of continued training for you and your employees, depending on the nature of your business. And the costs related to the need to have mandatory certifications. Web development (maintenance) and the expenses of your agency.

Tip #7

Remember that the main source of financing for a business is and should be the customer. But that is not always possible, mainly because, in most cases, businesses are usually born without clients and many resources need to be invested in attracting them. And when you have them, the payment terms do not always coincide with the sale, that is, there are businesses in which the client pays you at the time of purchasing your product and others in which the client will pay you, either in installments, or medium and long term.

So where will you get resources from? Obviously, from your personal contributions and/or from your partners (if you have them). Investing in your business should be a logical obligation, mainly because it is the best letter of introduction when it comes to attracting and convincing new partners and investors. If you can capitalize on unemployment, do it .

You can also get more money by going to family and friends. Do not forget that unless the investment made by some of these family members and friends is very high, they should not be part of the company’s shareholders. If they are small contributions of capital, you can agree with them – in writing – that you will return the money borrowed with interest, and making it very clear that they will not participate in the decision-making of your project.

Another source would be private investors, which, in the initial stages (pre-seed and seed), are usually covered by business angels , and in more advanced stages, by venture capital . But, honestly, in low investment projects, it is very difficult in most cases to get their attention.

Another source of financing is lines of credit from both banks and public organizations. In the latter, participatory loans from entities such as Enisa play a very important role . You should also not forget the value provided by Reciprocal Guarantee Companies , which are financial entities that facilitate access to credit and improve financing conditions, through the provision of guarantees to banks, savings banks and credit cooperatives, Public Administrations and clients and suppliers. Another source that is not usually taken into account is having an industrial and/or technological partner, who does not provide capital, in the first instance, but does add value to your business.

Without a doubt, another source of financing is public subsidies and aid. Those of the ICO and those of the CDTI stand out . Keep in mind that they take time to arrive from when you request them. Therefore, you should not obsess. It is true that there are many very interesting subsidies and public aid of all kinds, but they entail a process that can make you lose focus on your business. This process, in most cases, is usually complex and requires investing time and resources, which, many times, you do not have. In these cases, it is best to outsource this task to companies specialized in the search and management of subsidies and public aid.

Another interesting source that you can turn to is crowdfunding : collective financing through individuals, companies and investors. You can also seek support from organizations such as the European centers of innovative companies , science and technology parks , local and regional development agencies , the Spanish Confederation of Young Entrepreneurs , chambers of commerce , the Incyde Foundation , the Spanish Confederation of Associated Work Cooperatives , universities and business schools that have investor clubs and self-employed organizations such as ATA , UATAE , CEAT , UPTA and CONAE .

Tip #8

The clearest way to know whether your potential clients will like your proposal or not is by designing a minimum viable product (MVP) of your solution. We are not talking about building or manufacturing anything, but about developing something, a skeleton, that allows you to know the opinions of your market and know if you are on the right track and what things you should change, improve, eliminate, add… The PMV will allow you to iterate and pivot, that is, you can change ‘pieces’ of client, channel, price, etc. There are numerous tools that will help you design your PMV : empathy maps, which will help you make a profile of what your client is like and what interests them and put yourself in their shoes. Also the user test or co-creation, which consists of selecting several users and showing them a first basic prototype, as if it were a puzzle from which you remove pieces and let the users solve it. Observe them to see what they interpret from what you teach them.

You can also design a basic prototype through a 3D printer. You can even use storyboards or storyboards, so that, through vignettes or sequenced illustrations, you tell a story (we recommend The Key is the Napkin , by Dan Roam ). Other tools are videos, infographics, roleplay (group dynamics) or prototyping applications such as Justinmind, Unbounce, Balsamiq and Axure, among others.

Tip #9

We are not going to tell you what you have to do; You will have to decide that, but it is true that at Emprendedores we have always advocated undertaking something in which you have experience, either because you have worked previously or because you have knowledge on the subject. The fact that experience is a degree is not free. Having experience will save you time in the development and growth of your project because it will allow you to access specialized contacts more quickly and will help you know the rules in which a certain market operates, among other advantages.

If you don’t have experience, try to surround yourself with professionals who do. If you do not have the resources to hire them, look for sector reports and/or attend sector events. Everything you do in this sense will be positive to know your market better. You can also reach agreements with other professionals that complement your business.

Tip #10

You will also gain a lot if you have specific training, which is more necessary the greater the degree of specialization of your project. The Internet offers many free and paid resources to find the most appropriate training for what you need. You can also turn to public and private institutions, mainly sectoral ones, that will help you. You do not have to be experts in all areas of business, but you should have a minimum of knowledge of how a business is managed, with special emphasis on the financial, commercial and sales aspects.

Tips for starting a business with little money

Self-employed or partnership?

“For a business with few resources that, a priori, does not move large amounts of money and is not susceptible to generating high debts, and also being a single entrepreneur, the first option would be to become self-employed and access the flat rate of 60 euros,” recommends Javier Donoso , business consultant, director of Improdex and Creaciondempresas.es .

In his opinion, “it is a way to save costs in Social Security, in advice and it gives time to verify whether the idea is viable or not, without the greatest rigidity regarding the creation and dissolution of a company, referring to deadlines and costs. And you could opt for a SL, if there was the option of generating significant debts that compromised personal assets and it was not possible to benefit from the Second Chance Law for the self-employed, if there were more partners or if great benefits were expected in the first years.

Donoso maintains that, to move to SL, there is always time. “Once the project is established or because another series of conditions occur (benefits, partners, client requirements…) it will be time to consider, after a fiscal and strategic economic study, moving to a SL or a Labor Company.”

Prepare a treasury plan

You must know at all times what you have to pay and what to charge . And you must make that plan for the future (short and medium term), in which you must take into account, among other things, collections, payments and their deadlines. This way you will avoid cash flow gaps. Imagine that you have a store where you sell bags for between 30 and 60 euros. A simple calculation is to know how much money you should have each month to cover, at least, the expenses of the premises.

Without going into assessing whether you have employees and other fixed and variable costs, think that if renting the premises, for example, costs you 2,000 euros per month, how many bags do you have to sell to at least cover that rent? And we say ‘without going into assessing other costs…’ because you would also have to calculate the cost of maintaining the premises, the cost of purchasing products, etc. But, focus for now on how many bags you will have to sell. We set an average price of 45 euros per bag. Divide 2,000 by 45. You get between 44 and 45 bags. And that’s just to cover rent. How many bags will you have to sell per day to reach those 44-45 bags per month? What if there are days when you don’t sell any? It is important that you make these reflections to know the degree of viability of your business.

Control of expenses to face unforeseen events

When you have limited resources (human, material and financial), “it is especially important to prioritize efforts and choose the destination of those resources towards those activities that act as a catalyst to be able to grow. Thus, to maximize the use of these limited financial resources, the best advice is to control and limit the structure of fixed expenses,” emphasizes Manuel Ruiz , partner at Núbica .

Sometimes, this expert maintains, good initial prospects can cause us to overestimate costs. “Then, the path is usually not as planned, as obstacles, delays and unforeseen events arise that delay obtaining income or reduce the expected growth rate. Therefore, increasing expenses disproportionately poses a risk to the survival of the company.”

Ruiz also recommends avoiding unnecessary expenses. “Some entrepreneurs, guided by the concept of ‘thinking big’, visualize their position several years in the future and undertake expenses typical of larger companies, when they are not yet prepared for it.”

Another tip is to take advantage of public incentives, as a complement to private financing. “There are different options that can help finance startups, from public aid (in the form of a loan or subsidy) to savings mechanisms (such as Social Security bonuses or tax deductions that can be monetized in the absence of benefits). The diversity of incentives and the heterogeneity in the ways to access them often make it difficult for the entrepreneur to take advantage of these public instruments,” says Ruiz.

Discover your weaknesses

There are different tools to study the viability of your project, but we recommend the classic SWOT , which will help you analyze the internal characteristics (Weaknesses and Strengths) and external characteristics (Threats and Opportunities). One of the advantages of this analysis is that you can apply it to any management situation, type of company or business area. Internal analysis consists of detecting the strengths and weaknesses of your project that give rise to competitive advantages or disadvantages.

And this analysis is done on areas such as production (capacity, manufacturing costs, quality and technological innovation), marketing (line and range of products, image, positioning and market share, prices, advertising, distribution, sales team, promotions and customer service), organization (structure, management and control process and company culture), personnel (selection, training, motivation, remuneration and rotation) and finances (available financial resources, level of debt, profitability and liquidity, research and development, new products, patents and lack of innovation).

External analysis will help you identify and analyze the threats and opportunities of your market (to define your target and its characteristics, size and market segment, evolution of demand, consumer desires, types of purchase, behavior when purchasing ), sector (to detect market trends and potential opportunities, studying companies, manufacturers, suppliers, distributors and customers), current and potential competition (products, prices, distribution, advertising, etc.) and environment (economic, political, legal , sociological, technological…).

Your first clients

To attract the first customers, you can prepare a landing page , a simple web page in which you explain what what you want to sell is for. There is a form for users to request more information or leave their email , so that when the first version of the product is launched, you can notify them and they can be the first to try it.

As support, launch a campaign on blogs and social networks. Maybe you can even run a Google AdWords campaign to get more traffic. In parallel, you can do a pre-sale, which consists of presenting the product you are working on, specifying its characteristics, so that users place an order, which they will receive when it is manufactured.

Another possibility is to run a crowdfunding campaign to attract potential investors for what will be your future product. Some interesting platforms are Kickstarter , Indiegogo , Crowdcube , TheCrowdAngel or Ulule . You can also start with a basic free product , so that users have an idea of ​​what you are going to offer them.

Tips for starting a business with little money

Start from home

Do not confuse starting a business at home with doing it alone, because the former does not prevent you from starting a business with other partners; yes, each one in his house… And if not, tell Julio Martínez and Jorge Lluch , from Abacum , a financial planning SaaS for SMEs; to Patricia Muñoz de Ayerbe and Paula López , from Health-Nap , who have developed a virtual reality solution to reduce anxiety and perception of pain in patients, or to Sébastien Chartier and Cristina Hernández , from Tu Lecho al Techo , a bed project Elevatable to optimize spaces in the home. All of them started during confinement, just like Sergio Pinto and his Bid Bike project , a platform that guarantees the sale of a motorcycle in seven days.

Without the need for a location

What all of them have in common is that their projects have a technological base and do not require a location initially – which does not mean that they will need one in the future, depending on the business model they want to develop. The fact, a priori, of not depending on a location will influence the entire development, because it will affect all business areas, from finances to marketing and sales.

As Vicente Esteve , CFO at Voicemod and advisor to startups for years, states, “this situation is not new. Many new entrepreneurs have started ‘from the garage’ with their first prototypes, MVPs, alpha versions, etc., until they find the product/market fit or a reasonable level of confidence that has allowed them to start looking for more equipment and a space to coexist. . The only difference now is that we have already overcome the barrier of needing a physical space to have equipment. Now, we can scale a business remotely and distributed, even attract international talent very early (at least, potentially).”

Whether you undertake it alone or in a company, you must be clear about which tasks you are going to dedicate yourself to and which ones to outsource. With partners, it will always be ‘easier’ to distribute tasks based on each person’s experience and knowledge. In the case of entrepreneurship alone, focus on what you control and outsource the rest. In any case, you should never forget or ignore key business areas such as product and/or service development and commercial action. Those, it is better that you (and/or your partners) manage them directly to have everything under control.

What do you want to sell?

At first, organize a few hours of work a day to define your product and/or service and design a prototype of what you want to sell. The initial investment is intended “to validate hypotheses or to attract customers, if you have already reached the product/market fit ,” says Esteve, who also recommends having a home, hosting and a website .

Jordi Damià , professor of strategy at EADA Business School and CEO of Setesca , assures that “the entrepreneur faces the need to constantly carry out commercial action, while, starting from the first orders, he must also manage the processes in parallel. operational. This requires dividing time to ensure that the two actions are carried out in parallel and one does not detract from the other.”

Esteve recommends having tools that help you control your finances (invoicing, banks, costs…), like Holded and its intelligent management software . “After having tried several, it solves a large part of the needs of entrepreneurs in the initial stages, with small businesses, even with or without staff. And if it were professional services, I recommend a time control tool, not a clocking tool. It allows you to allocate hours to client projects, so that you can keep exhaustive control of the time spent, which is what will later be billed. G Suite is surely interesting, although there are surely other options, but it brings together shared work, spreadsheets, presentations and a lot of integrated tools. Metabase is a free BI that allows you to connect (with some help from developers, but a high level is not necessary) business data sources to analyze them, it is free and not difficult to use.

Eva Pijuan , an expert in digital marketing and specialized in digital businesses of handmade products, assures that, in addition to having a corporate site or a virtual store, “you must identify the social networks that your clients use the most and maintain an active account on all of them. they”. And she remembers that “Google continues to perfect its algorithms to improve the visitor experience. This is reflected in the results that this tool offers as a suggestion to the searches that users carry out. In other words, it forces companies to create content that captivates and thus achieve good classification when found on the web .”

For his part, Damià recommends taking breaks to do some type of exercise, stretching or simply paying attention to what is not the screen. “Teleworking is very absorbing and long days without breaks end up reducing productivity.”



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