Aspiring entrepreneurs are under the impression they need large lines of credit, and when they hit obstacles, they frequently keep pouring more money towards the same mistakes rather than having to find creative solutions. It’s my firm belief that this keeps them from ever developing their problem solving muscles.
As a successful serial entrepreneur, I know first hand that starting on a shoestring and having no back-up capital is the best way to grow a profitable business.
The first business I started at 23 happened almost on a dare. I had no idea what I was doing until I did it I had planned to start a creative arts program for pre-schoolers and was working to save start-up money. My father had a furniture and appliance business and needed help with advertising. When I realized how much commission an ad agency takes, I walked into my dad’s office and said, “If we start an in-house agency, we can save (a figure equal to 15%) a year”. Coincidently, the figure was more than double my salary. He looked at me and without blinking said, “so do it.” I knew that translated to “YOU figure out how to do it on ON YOUR OWN.” He did NOT offer to loan me money and I didn’t ask . I’m convinced that’s why I’ve been successful. He gave me the gift of faith in my ability to be a creative problem solver.
So often new entrepreneurs get caught up in lawyers, accountants and business plans. Yes, you will need them eventually but rather than spend on high paid professionals right off the bat, start out simply as a sole proprietor and once you see you are making money, you can hire someone to count and tax-shelter that money.
AND You won’t need a formal business plan if you aren’t going to apply for a loan.
When my husband and I decided to start our own furniture business, we didn’t have the money to set up a brick and mortar store so we sold our little house and took the very tiny equity-$12,000, purchased one truckload of furniture, rented a hotel banquet room and started a pop-up business that we eventually grew to 17 retail stores grossing 25 million-without ever borrowing a dime. At first, we were literally living out of hotel rooms and a van with a toddler. It was a huge risk so we had no choice but to succeed. Having made the decision not to borrow money, we had to be creative because there was nothing to fall back on. We made some mistakes in the beginning and if we’d had a lot of capital, we may have blown it before we learned some valuable lessons. Instead, we became resourceful and innovative problem solvers.
In 2000, I fell in love with a small seaside tourist town on the central coast. I felt pulled to leave Southern California and get back to art and this seemed like a perfect location for an art gallery. Having no idea how I was going to do it, I signed a lease on a retail space in October with a commitment to open Thanksgiving weekend. Then my son and I headed to the lumber yard for plywood to build display pedestals. My only experience with the art business was selling my work at craft fairs when I was very young, so I spent the next few weeks going to Open Studios, chatting with artists and trying to figure out what sells. Because I don’t believe in putting a lot of money into start-ups, I talked about 50 artists and craftsmen into working on a consignment basis. I ran the gallery alone 7 days a week for the first several months until the business could afford the first employee. Some of the merchandise I started with turned out to be wrong for the clientele but because it was on consignment, I didn’t lose money. I simply returned it to the artists, grateful I hadn’t invested start-up capital and considered the lesson a blessing. Once there was good cash flow, I began attending trade shows and purchasing contemporary crafts wholesale but I never bought more merchandise than I knew I could pay for within 30 days.
Within the first couple of years, the business had outgrown the first location, I had a great team of loyal employees, an enviable income and a strong following with locals and tourists.
When it was time to move on, I sold the business for a very nice six figure profit.
If you’re ready to start a business and the only thing stopping you is start-up funds, hold that big vision but look for creative ways to start small and grow. I’ll show you how to start with little or no cash outlay in this e-guide “How to Start a Pop-up Shop without a Bankroll.”